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UK retail – Worst sales in 16 years

UK retail sales values were down 1.9% on a total basis from March 2010, when sales had risen 6.6%, boosted by Good Friday and Easter Saturday falling in the March trading period. On a like-for-like basis, sales were 3.5% lower, against a 4.4% increase in March 2010. Non-food non-store (internet, mail-order and phone) sales growth fell further in March. Sales were 7.5% higher than a year ago, the smallest increase since the series began in October 2008 and much weaker than the 10.4% in February.”

Of interest is the drop in internet, mail-order and phone sales as these are relatively immune to rising fuel costs (meaning it is cheaper to buy online that take the car and engage in physical shopping). Icelandic firms considering exports to the UK should hold back a bit unless they already have orders in the pipelines. This does not apply to firms already exporting there.

This is the worst drop in total sales since we first collected these figures in 1995. Non-food retailers were particularly hard-hit. This is strong evidence of the pressure customers and traders are under. This year’s later Easter is a factor but this fall goes way beyond anything that can be explained by that alone. Uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for thirty years. Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to.” Stephen Robertson, Director General, British Retail Consortium

The root of this problem lies in the credit system collapse and shows how dangerous it really is to separate value from physical assets. The banks must completely rethink their growth strategies as we are headed directly toward an extended era of diminishing returns both in terms of returns on equity and taxable income. There is a lot of capital stashed away that needs to be put into circulation. Betting on short-term gains at the moment is extremely risky.

The food sector suffered in the month due to Easter purchasing falling into March last year, thus impacting the overall results. However, beyond this the trend continues in a marked downward direction: non-food continues to struggle, with big-ticket and home-related sectors again being the hardest hit. We have seen an emergence of new, lower spending patterns since the middle of January, which are currently continuing to trend downwards. Many retailers will not be able to sustain this ongoing weakness in demand beyond the short-term and are hoping for some good news around the extended bank holiday period and a feel-good factor driven by the royal wedding. However, as disposable income continues to fall, without reducing saving or increasing borrowing – which would oppose current trends – this will not be possible.” Helen Dickinson, Head of Retail, KPMG

To put matters point-blank – residual income has to go up one way or another.

Source: British Retail Consortium


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