Yahoo Finance UK retail sales drop as squeezed UK households cut spending
Retail sales across the UK dropped 1.5% in May as the cost of living crunch hampered demand, according to the British Retail Consortium (BRC).
UK retail sales decreased 1.5% like-for-like in May compared to the same month last year, when they had increased 18.5%. Overall, sales decreased by 1.1% in May, against an increase of 28.4% in May 2021.
Food store sales were down 1.3% over the three months to May, and non-food retail sales decreased by 1%.
“Sales continued to see declines as the cost of living crunch squeezed consumer demand. Higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time,” Helen Dickinson, BRC’s chief executive, said.
“Nonetheless, fashion and beauty did well as people prepared for holidays abroad and the summer’s social calendar; with red, white and blue outfits adorning shopping carts ahead of the Jubilee weekend.”
Online sales decreased by 8.5% during May, compared with a decline of 8.1% in May 2021.
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The Jubilee Bank Holiday gave UK high streets a much-needed lift as shopper footfall surged.
BRC-Sensormatic IQ data revealed that total UK footfall increased by 6.9% over the long weekend, compared with the average for May 2022.
Meanwhile, total footfall for the whole week increased by 17.1% as retail hotspots benefited from the school holidays.
“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power,” said Dickinson.
“Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.
“Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers.”
Inflation has hit its highest level in 40 years amid the intensifying cost of living crisis. The rate shot up to 9% in April — its highest level since comparable readings in 1982.
Read more: UK shop prices to rise as retail inflation hits highest since 2011
The Bank of England is forecasting that inflation will top 10% later this year — with food prices set to provide greater upwards pressure due to crucial supplies of things like wheat being held up in war-torn Ukraine.
These sales figures are not adjusted for inflation, prompting the BRC to warn that the small drop in sales “masked a much larger drop” in volumes once inflation is accounted for.
“For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living,” Paul Martin, UK head of retail at KPMG, said.
“The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for.
“Retailers will be hoping that a post-Jubilee and summer feel-good factor begins to improve confidence amongst some shoppers — as presently overall confidence levels are lower than sales may suggest.
“Cost and efficiency will firmly be top of agenda for most operators, and understanding how they can protect their margins whilst remaining price competitive for consumers.”
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Richard Walker, managing director of Iceland, said the supermarket chain’s customers have started “disappearing to food banks” because of the cost of living crisis.
“We are hearing stories of some of our custom disappearing to food banks, which is a reality, or, indeed, some customers when they are at the till asking the cashier when it amounts to 40 quid so that they can leave the rest of their shopping. It’s fair to say, everyone’s feeling the pinch, but the harder-pressed are feeling it more than anyone,” he recently told Sky News’ Sophy Ridge On Sunday programme.
