Fears that Britain’s economy has come to a standstill have been heightened by a report from retailers showing annual consumer spending at its weakest since their records began in the mid-1990s.
The British Retail Consortium said clarity over Brexit was urgently required after falling sales in June came as a marked contrast to the bumper World Cup and weather-related activity of a year earlier.
In its monthly health check of the sector conducted with the consultancy firm KPMG, the BRC said total sales fell by 1.3% last month while the annual rate of growth slowed to 0.6%.
Both were the weakest since the survey was launched in 1996 and add to the evidence that consumers – up until now the mainstay of growth – have started to spend less freely despite an increase in disposable income caused by earnings growing faster than inflation.
The Office for National Statistics is expected to report that the economy moved sideways between April and May when it provides its latest update on Wednesday.
Helen Dickinson, the BRC’s chief executive, said: “June sales could not compete with last year’s scorching weather and World Cup, leading to the worst June on record. Sales of TVs, garden furniture and barbecues were all down, with fewer impulse purchases being made. Overall, the picture is bleak: rising real wages have failed to translate into higher spending as ongoing Brexit uncertainty led consumers to put off non-essential purchases.
“Businesses and the public desperately need clarity on Britain’s future relationship with the EU. The continued risk of a no-deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations – this represents time and resources that would be better spent improving customer experience and prices. It is vital that the next prime minister can find a solution that avoids a no-deal Brexit on 31 October, just before the busy Black Friday and Christmas periods.”
The BRC report showed that the problems of the retail sector were concentrated among non-food stores, which were down 4.3% over the latest three months and by 2.8% annually.
Consumers are increasingly shopping online, with BRC data showing that more than 30% of non-food items were bought over the internet. The digital penetration rate rose from 28.5% to 30.7% between June 2018 and June 2019.
Paul Martin, KPMG’s UK head of retail, said: “There are few places retailers can hide from the difficult trading conditions that have been hitting the industry for some time. June’s retail performance did little to ease that, with like-for-like sales falling 1.6% compared to last year.
“Pressure on retailers continues to mount and is seemingly coming from all angles: economic, geopolitical, environmental and behavioural. Consumer spend is only likely to fall further as things stand and cost efficiency remains vital. The focus for most in the industry will be preservation and adaptation in order to see them through these tough times.”