British retailers are suffering the sharpest drop in spending since the height of the coronavirus pandemic as hard-pressed consumers tighten their belts in the wake of soaring inflation.
The British Retail Consortium’s (BRC) monthly health check reported a third straight fall in activity as the cost of living crisis continues to bite.
With annual inflation reaching 9.1% in May, the BRC said even a boost in demand caused by the Queen’s Platinum Jubilee celebrations failed to prevent June retail sales from being 1% lower compared to a year earlier.
The lobby group said retailers were struggling to avoid passing on higher costs to their customers and called on the government to provide help through lower business rates.
Separate research from Barclaycard showed a similar picture to the BRC, with an annual fall of more than 5% in spending on household goods, showing evidence of a reduction in consumer discretionary spending. The payments company said 91% of people were concerned about the negative impact rising household bills would have on their personal finances – up from 88% in May.
With growth slowing, interest rates rising and the Bank of England forecast for peak inflation above 11%, Barclaycard said consumers were also feeling less optimistic about their ability to live within their means and their ability to spend for non-essential goods.
Helen Dickinson, chief executive of the BRC, said: “Sales volumes are falling at a rate not seen since the height of the pandemic as inflation continues to bite and households cut back on spending. Discretionary purchases were hit hard, particularly white goods and home goods, while consumers also traded up to cheaper brands in food and non-food.
“Although the anniversary weekend gave a temporary boost to food sales and fashion sales benefited from the summer holiday and wedding season, it was not enough to counter a significant slowdown in consumer spending.”
The BRC’s sales monitor showed food spending 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 in 2021.
Barclaycard – which charts spending on dining out, entertainment and holidays in addition to retail sales – said spending on the card was 6.6% higher in June than a year earlier. There was higher spending at cinemas and bars and on trips abroad last month.
The latest report found that motorists’ spending has risen by almost a quarter year-on-year following a steady increase in the price of fuel, which has pushed the average price of unleaded petrol above £1.90 a litre.
Jose Carvalho, head of consumer products at Barclaycard, said: “The continued rise in fuel, food and energy prices means consumers need to budget and look for value where they can, for both essential and non-essential purchases.
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“While this cautious approach affects supermarket and individual basket spending, there are bright spots to be found, with Britons increasing their discretionary spending on entertainment, travel and takeout as we head into the height of summer.”
Dickinson said: “Retailers are caught between significantly rising costs in their supply chains and protecting their customers from rising prices. The Government needs to get creative and find ways to help ease some of this cost pressure – the upcoming consultation on transitional relief is a golden opportunity to ensure retailers don’t overpay on their business rate bills.
“Government action on transitional relief would make a significant difference to retailers’ costs and ease price pressures for customers.”
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