Business news live: UK recession fears rise as survey points to sharp fall in retail sales

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The prospect of a Brexit-induced recession is looming larger after a survey signalled UK retail sales dropped unexpectedly in August, dealing a blow to hopes that consumer spending can rescue Britain’s ailing economy.

Just 10 per cent of retailers polled by the Confederation of British Industry said sales increased in August compared to a year ago, with 58 per cent saying sales were down. Outlook for the month ahead hit its lowest level since the financial crisis.

Shoppers had been helping to keep the economy afloat by continuing to spend but the latest data indicates they are becoming more cautious, increasing the prospect that growth could be negative for a second quarter in a row.

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Key Points

• Retailers expect the sharpest deterioration in business conditions since February 2009
• Household incomes growing more slowly than UK economy
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[22 August 2019 11:06 · ben.chapman]

Orders cancelled after second fire at Ocado warehouse

Ocado has cancelled some customers' food deliveries after another fire broke out at one of its warehouses.

The online supermarket said a "small fire" at its warehouse in Erith was put out by the London Fire Brigade on Wednesday night.

Affected customers will be offered a new delivery slot on Friday.

In February, a larger blaze broke out at Ocado's warehouse in Andover, causing widespread damage.

[22 August 2019 11:27 · ben.chapman]

Retailers expect the sharpest deterioration in business conditions since February 2009 in the coming months, according to the Confederation of British Industry.

Its latest survey found that just 10 per cent of retailers reported sales had increased over the past year while 58 per cent said sales were down.

Anna Leach, the CBI's deputy chief economist, says:

“Sentiment is crumbling among retailers, and unexpectedly weak sales have led to a large overhang of stocks. With investment intentions for the year ahead and employment down, retailers expect a chilly few months ahead.

[22 August 2019 12:19 · ben.chapman]

Retail sales deteriorate sharply

Consumers have been keeping the UK economy afloat of late as businesses hold off investment, awaiting any kind of certainty on the outcome of Brexit.

But the latest CBI survey suggests shoppers are starting to become more cautious.

Hoard Archer, chief economic advisor to the EY Item club says:

The CBI distributive trades survey points to sharply weakened retail sales over late July and the first half of August.

Specifically, the balance of retailers reporting year-on-year growth in sales volumes plunged to-49% in August from -16% in July. This was the lowest balance since December 2008 and the second lowest since the survey began in 1983.

Why might this be happening?

We believe earnings growth may well have peaked in the 3-months to June (when they reached an 11-year high of 3.7%) while employment growth is likely to slow. It seems highly questionable whether the labour market can sustain its recent improvement as companies face a soft domestic economy and a highly challenging combination of domestic political, global economic and Brexit uncertainties.

Other factors may limit consumer spending. In particular with the sa ings ratio very low, consumers may at the very least be keen to avoid further dissaving - especially given all of the major uncertainties.

[22 August 2019 12:20 · ben.chapman]

The CBI says we could be seeing a “broadening” rather than a “deepening” in the decline in sales...

[22 August 2019 12:47 · ben.chapman]

Tesco has pledged to ban any brands that use excessive packaging from its stores in a bid to reduce plastic waste.

On Wednesday, the supermarket announced the launch of the second phase of its "Remove, Reduce, Reuse & Recycle" plan which aims to remove hard-to-recycle materials from products.

Thanks to the scheme, Tesco will have removed 4,000 tonnes of hardest to recycle materials from its brand products by the end of the year and now it wants to work with brands to do the same.

More details from Sarah Young:

Tesco to ban brands that use excessive packaging