Inflation deals another blow to under-fire retail sector in February, data shows

Consumers being pushed to spend a greater share of their income on essentials

Josie Co
Business Editor
@JosieCox_London
Tuesday 06 March 2018 01:08
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Retailers specialising in all sectors have been battling tough market conditions as consumers have changed their shopping habits
Retailers specialising in all sectors have been battling tough market conditions as consumers have changed their shopping habits

Inflation continued to eat into shoppers’ budgets in February, data from the British Retail Consortium (BRC) shows.

Although overall sales increased by 0.6 per cent on a like-for-like basis last month, non-food sales, when measured across the same shops as the previous year, fell by 1.1 per cent in the three months to February, which is well below the 12-month average.

“The headwinds to retail spending continued to blow strong in February,” said Helen Dickinson, chief executive of the BRC. “Inflation is still eating into shoppers’ budgets, pushing them to spend a greater share of their income on essentials and leaving less left over to buy discretionary, predominantly non-food, retail items,” she added.

“At the same time, weak growth in household earnings is keeping overall sales low.”

Official data at the end of February showed that UK unemployment rates rose unexpectedly in the three months to December – the first increase in almost two years. And average wages increased by just 2.5 per cent over that period, which is below the rate of inflation, meaning that real wages are still falling.

Paul Martin, head of retail at KPMG, the professional services firm which compiled Tuesday’s data together with the BRC, said that “retailers experiencing any growth in this environment will be counting themselves lucky”.

“Softening consumer demand, rising costs for retailers and of course the ongoing structural changes within the industry, are creating the perfect storm which is uprooting the weakest players,” he said.

Last week, two of the UK’s best-known retailers – Toys R Us and Maplin – collapsed into administration, putting well over 5,000 jobs at risk.

Retailers specialising in all sectors have been battling tough market conditions as consumers have changed their shopping habits, increasingly spending money online with the likes of Amazon, at the expense of trips to bricks-and-mortar outlets.

“The retail shake-out will gather further momentum in the coming months, and retailers with large physical store estates are particularly under pressure,” said Mr Martin. He also said that the cost of one of the coldest winters on record has “yet to be factored in”.

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