British retailers are suffering the sharpest drop in spending from the depths of the coronavirus pandemic as troubled consumers tighten their belts as a result of rising inflation.
The British Retail Consortium’s (BRC) monthly health check reported a third consecutive drop in activity as the cost-of-living crisis continued to sting.
With the annual inflation rate reaching 9.1% in May, the BRC said that even the boost in demand caused by the Queen’s platinum jubilee celebrations did not prevent sales in the detail in June were 1% lower than the previous year.
The lobbyist said retailers were struggling to avoid passing on higher costs to their customers and urged the government to offer help through lower trade rates.
A separate Barclaycard survey showed a similar picture to the BRC, with a year-over-year drop of more than 5% in household items spending, showing that consumers are reducing discretionary spending. The payments company said 91% of people were concerned about the negative impact of rising household bills on their personal finances, more than 88% in May.
With the slowdown in growth, rising interest rates and the Bank of England’s forecast of inflation above 11%, Barclaycard said consumers also felt less optimistic about the their ability to live according to their possibilities and their ability to spend on non-essential items.
Helen Dickinson, BRC’s chief executive, said: “Sales volumes are falling at a rate not seen from the depths of the pandemic, as inflation continues to bite and households are cutting spending. discretionary purchases were severely affected, especially white goods and household items, while consumers also switched to cheaper brands in both food and non-food items.
“While the jubilee weekend gave a temporary boost to food sales and fashion sales benefited from the summer holidays and wedding season, that wasn’t enough to offset the substantial slowdown of consumer spending “.
The BRC sales monitor showed that food spending was higher in June than a year earlier, while non-food spending declined. During the three months to June, non-food retail sales were 3.3% lower than in the same period in 2021.
Barclaycard, which shows spending on eating out, entertainment and vacations in addition to retail sales, said spending on cards was 6.6% higher in June than a year earlier. Last month there was a higher expenditure on cinemas and bars and on trips abroad.
The latest report found that motorists’ spending rose by almost a quarter of a year after the steady rise in the cost of fuel, which has brought the average price of unleaded petrol above £ 1.90 sterling a liter.
José Carvalho, head of consumer products at Barclaycard, said: “The continued rise in the prices of fuels, food and energy means that consumers have to budget and look for value where they can for both essential and non-essential purchases. .
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“While this precautionary approach is affecting supermarket and individual basket spending, there are bright spots to be found, with the British increasing their discretionary spending on entertainment, travel and takeaway as we head to the summer”.
Dickinson said: “Retailers are caught between significantly increasing the costs of their supply chains and protecting their customers from rising prices. The government needs to be creative and find ways to help alleviate a part of this cost pressure: the upcoming consultation on transition relief is a golden opportunity to ensure that retailers do not overpay on their trade tariff bills.
“Government action on transitional relief would make a significant difference in retailers’ costs and reduce pressure on customer prices.”