Yahoo Finance UK retailers face struggle in year ahead despite recent festive cheer
UK retailers are set to face a number of headwinds this year despite recent successful sales during the festive period.
According to the British Retail Consortium (BRC), firms will be hit with a reduction in consumer spending thanks to rising inflation, increasing energy bills, and April’s national insurance hike. This is on top of continuing labour shortages, and rising transport and logistics costs.
It comes as sales increased by 2.1% in December, against a growth of 1.8% in December 2020, when much of retail bounced between being open and closed due to coronavirus restrictions.
The figures were above the 3-month average growth of 2.8% and the 12-month average growth of 9.9%, the data showed.
On a like-for-like basis sales climbed 0.6% from the previous year in the five weeks from 28 November to 1 January. Apparel and jewellery continued to dominate Christmas gift buying at the tills, whilst spending on food and drink was solid, although it slowed to just over 1%.
In the three months to December, food sales increased 0.4% on a total basis and 0.1% on a like-for-like basis, non-food retail sales grew 4.8% and 36% respectively during the same period.
For 2021 overall, the BRC revealed that total sales increased 9.9% compared with 2020. Food growth was 3.1% higher and the non-food growth was up 15.6% for the year.
The BRC added that despite the outbreak of Omicron, retail sales managed to hold up last month, even as many Brits chose to shop online rather than travelling to high streets and shopping centres.
Loungewear was also back in fashion, as many pre-empted the possibility of future restrictions, and the return of work-from-home advice caused formalwear sales to slow.
Footwear was the only online category to see mild growth as overall online sales continued to decline, falling by over 8% in December.
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“In the face of rising case numbers and supply chain issues, people in retail pulled out all the stops to ensure everyone got what they wanted this Christmas,” Helen Dickinson, chief executive of the BRC said.
“Retailers did well to weather the challenging trade conditions, with retail sales for 2021 up on both the previous year and compared to pre-pandemic levels. Continuing a trend throughout the pandemic towards online shopping, 2021 saw a double digit rise in non-food online sales, a testament to retailers’ huge investments in their online platforms."
Paul Martin, head of retail at KPMG, said: “As we head into 2022, retailers will be keeping close to government COVID-19 updates and hoping consumer confidence holds up in order to offset the rising cost challenges they are likely to experience for the foreseeable future.
“Retailers have worked hard to manage factors in their control throughout the pandemic to adapt to the changing environment, but there are many macro factors outside of their control that could impact them this year.
“With many retailers cautiously optimistic for 2022, focussing on continuously re-engineering their business models, ensuring they operate resilient supply chains and have a tight grip on their costs will be the top priorities.”
Read more: UK business growth slows as Omicron cases rise
The data comes as Springboard announced separately that footfall across UK retail destinations declined by 6% last week across all UK destinations from the week before.
Footfall dropped by 25.6% in Central London versus local high streets which experienced a more modest decline — a fall of 2.8% in market towns. In Outer London footfall rose by 2%
The Central London "Back to the Office" benchmark declined by 15.2% and by 17.1% in regional city centres outside of the capital.
The decline in footfall was driven by a drop of 10.9% in high streets and 4.4% in shopping centres, whilst footfall rose by 2.9% in retail parks.
