Britain’s retailers are suffering the sharpest drop in spending since the depths of the coronavirus pandemic as hard-pressed consumers tighten their belts as a result of soaring inflation.
The monthly health check from the British Retail Consortium (BRC) reported a third successive drop in activity as the cost of living crisis continued to bite.
With the annual inflation rate hitting 9.1% in May, the BRC said even the boost to demand caused by the Queen’s platinum jubilee celebrations failed to prevent retail sales in June being 1% lower than a year earlier.
The lobby group said retailers were struggling to avoid passing on higher costs to their customers and urged the government to provide help through lower business rates.
A separate survey from Barclaycard showed a similar picture to the BRC, with a year-on-year drop of more than 5% in household goods spending providing evidence of consumers cutting discretionary spending. The payments company said 91% of people were concerned about the negative impact of rising household bills on their personal finances – up from 88% in May.
With growth slowing, interest rates rising and the Bank of England forecasting an inflation peak above 11%, Barclaycard said consumers were also feeling less optimistic about their ability to live within their means and their ability to spend on nonessential items.
Helen Dickinson, the BRC chief executive, said: “Sales volumes are falling to a rate not seen since the depths of the pandemic, as inflation continues to bite, and households cut back spending. Discretionary purchases were hit hard, especially white goods and homeware, while consumers also traded down to cheaper brands in food and non-food alike.
“While the jubilee weekend gave food sales a temporary boost, and fashion sales benefited from the summer holiday and wedding season, this was not enough to counter the substantial slowdown in consumer spending.”
The BRC’s sales monitor showed spending on food was higher in June than a year earlier, while non-food spending declined. Over the three months to June, non-food retail sales were 3.3% lower than in the same period of 2021.
Barclaycard – which charts spending on eating out, entertainment and holidays in addition to retail sales – said card spending was 6.6% higher in June than a year earlier. There was higher spending in cinemas and bars and on foreign travel last month.
The latest report found spending by motorists was up by almost a quarter year on year after the steady increase in the cost of fuel, which has taken the average price of unleaded petrol above £1.90 a litre.
José Carvalho, the head of consumer products at Barclaycard, said: “The continued rise in fuel, food and energy prices means consumers are having to budget and seek out value where they can for both essential and non-essential purchases.
“While this cautionary approach is impacting supermarket and individual basket spend, there are bright spots to be found, with Brits increasing their discretionary spending on entertainment, travel and takeaways as we head into high summer.”
Dickinson said: “Retailers are caught between significant rising costs in their supply chains and protecting their customers from price rises. The government needs to get creative and find ways to help relieve some of this cost pressure – the upcoming consultation on transitional relief is a golden opportunity to ensure that retailers aren’t overpaying on their business rates bills.
“Government action on transitional relief would make a meaningful difference to retailers’ costs and ease pressure on prices for customers.”
