Retail experts warn of ‘challenging’ months ahead as sales growth slows

According to Lloyds Bank’s business barometer index, every UK region notched a positive business confidence reading for the first time since July (Photo by Dan Kitwood/Getty Images)

Senior retail figures have warned that the coming months will be “challenging” for the sector, after sales slowed over January, falling below the three-month average growth of 5.2 per cent to 4.2 per cent 

Helen Dickinson OBE, chief executive at British Retail Consortium (BRC), said consumer confidence remains “stubbornly low” and looming rises in household bills and mortgages mean “discretionary spending will remain weak”. 

She explained: “With ongoing cost pressures and labour shortages increases in sales don’t convert into increases in profits or cash.”

The figures published in the BRC retail sales monitor also showed that UK like-for-like retail sales also only jumped 3.9 per cent  in January, compared with an increase of 11.9 per cent the previous year. 

“Consumers have funded their spending through taking on extra debt. However, real sales have suffered due to the cost-of-living crisis affecting consumers,” Nigel Parson, analyst at financial services firm Finncapp, told City AM. 

However, the figures have shown that non-food sales increased 2.9 per cent according to BRC, this was above the 12-month total average growth of 1.6 per cent. Food sales also increased by eight per cent.

Paul Martin, UK head of retail at KPMG, said: “With inflation running at around 10 per cent, sales growth for January nearly halved in comparison to December to just over four per cent – sending a clear signal that consumers have started the year with a tight rein on spending as they face another period of rising costs.

“As we head into a difficult time for consumers, the short-term outlook for the retail sector remains challenging. With the latest interest rate rise and utility price increases heading our way, shrinking household incomes means we will continue to see a shift in what consumers buy and where they buy from.”

It comes as the latest Barclays consumer spending report shows that card spending grew 9.7 per cent year-on-year in January, with spending on utilities soaring 44.7 per cent – the highest rate of growth since Barclays began tracking the data in April 2022.

Silvia Ardagna, head of European economics research at Barclays, said: “The recent rise in UK card spending is due in large part to inflation, base effects from last year’s Plan B restrictions, and probably some statistical effects resulting from the strikes.

“Looking ahead, we think that the UK economy is likely to contract in Q1, as demand drops in real terms due to the loss in household purchasing power, as well as rising energy and mortgage bills. However, the silver lining is that the labour market remains tight, with low unemployment and elevated wage growth.”


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