Brexit uncertainty hits retail growth

Retail sales only increased by 0.5 per cent in February, against a rise of 1.6 per cent during the same month last year, according to the latest British Retail Consortium (BRC) and KPMG figures.

This growth was below both the three-month and 12-month averages of 0.9 per cent and 1.2 per cent respectively.

Over the three months to February, in-store sales of non-food items declined 2.8 per cent on a total basis and 3.1 per cent on a like-for-like basis – below the 12-month total average decline of 2.4 per cent.

Meanwhile, food sales increased 1.3 per cent on a like-for-like basis and 2.4 per cent on a total basis – below the 12-month total average growth of 2.9 per cent, which is the lowest since August 2017.

Online sales of non-food products grew 5.4 per cent in February, against a growth of 6.4 per cent in February 2018. This is below the three-month average of 5.6 per cent and pulls down the 12-month average to 6.9 per cent.

The online penetration rate increased from 27.5 per cent in February 2018 to 29.6 per cent last month.

BRC chief executive Helen Dickinson suggested that uncertainty surrounding the UK’s imminent exit from the European Union has hit consumer spending.

“While real incomes have started to rise over the past year, shoppers have been reluctant to spend this February, holding back growth – this slowdown was not limited to physical stores, with growth in online non-food sales well below the twelve month average.

“With consumers increasingly aware of the risk of a no deal Brexit, it is likely that uncertainty has driven this cautious approach to retail spending,” she continued, adding: “If government wishes to reassure both the public and businesses, they should ensure a chaotic no deal - which would lead to higher costs, higher prices and less choice for consumers - is taken off the table with immediate effect.”

Paul Martin, UK head of retail at KPMG, pointed out that sluggish growth was evident across all categories, although the milder weather appears to have shifted the focus away from indoors, with furniture sales declining.

“Non-food continues to be under more pressure than grocery, with shoppers focusing on the essentials,” he stated. “To manage these dynamics, retailers have to continue managing cost and margin and carefully assess how to gain market share in a broadly flat market.”

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