UK retailers hit by sharp drop in spending due to rising inflation | Retail

Britain’s retailers are experiencing the sharpest drop in spending since the depth of the coronavirus pandemic, as consumers under pressure tighten their belts amid rising inflation.

The British Retail Consortium (BRC) monthly health check reported a third consecutive decline in activity as the cost of living crisis stalled.

With an annual inflation rate of 9.1% in May, the BRC said that even the surge in demand resulting from the Queen’s platinum anniversary celebrations failed to prevent retail sales from falling 1% in June. a year earlier.

The lobby group said retailers were struggling to pass on higher costs to their customers and urged the government to help through lower business rates.

A separate study by Barclaycard showed a similar picture to the BRC, with a more than 5% year-on-year decline in household item spending, showing consumers are cutting back on discretionary spending. The payments company said 91% of people were concerned about the negative impact of rising household bills on their personal finances – up from 88% in May.

With growth slowing, interest rates rising and the Bank of England forecasting an inflation spike of more than 11%, Barclaycard said consumers were also less optimistic about their ability to live within their means and their ability to spend on non-essential items. .

Helen Dickinson, the chief executive of BRC, said: “Sales volumes are falling at a pace not seen since the low of the pandemic, as inflation continues to bite and households are cutting spending. Discretionary purchases were hit hard, especially white goods and household goods, while consumers also turned to cheaper brands in both food and non-food.

“While the anniversary weekend gave food sales a temporary boost and fashion sales took advantage of the summer break and wedding season, it was not enough to counter the substantial slowdown in consumer spending.”

The BRC sales monitor shows that spending on food was higher in June than a year earlier, while non-food spending fell. In the three months to June, non-food retail sales were 3.3% lower than in the same period of 2021.

Barclaycard, which charts dining, entertainment and vacation spending in addition to retail sales, said card spending was 6.6% higher in June than a year earlier. Last month saw increased spending in cinemas and bars and on foreign travel.

According to the latest report, motorists’ spending rose by nearly a quarter year on year after the steady rise in fuel costs, pushing the average price of unleaded petrol above £1.90 per litre.

José Carvalho, head of consumer products at Barclaycard, said: “The continued rise in fuel, food and energy prices means consumers need to budget and where they can where they can for both essential and non-essential purchases.

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“While this cautious approach has an impact on supermarket spending and individual shopping baskets, there are bright spots with Britons increasing their discretionary spending on entertainment, travel and takeaways as we head into high summer.”

Dickinson said: “Retailers are caught between significantly increasing costs in their supply chains and protecting their customers from price increases. Government needs to get creative and find ways to alleviate some of this cost pressure – the upcoming transition relief consultation is a golden one.” opportunity to ensure that retailers don’t overpay on their corporate rate bills.

“Government measures regarding transitional arrangements would make a significant difference to retailers’ costs and ease pricing pressure on customers.”

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