UK retail slides at fastest rate since the 'depths of the pandemic'

Shoppers have switched to cheaper brands and cut items from grocery lists as soaring cost of living takes its toll

Empty shops in Chatham, south-east England. The British Retail Consortium is calling on the UK government to lower business rates. Getty Images

Retail sales in the UK have dropped at a rate “not seen since the depth of the pandemic” as rampant inflation forces consumers to slash discretionary spending, a report has found.

As households reined in spending, total retail sales dropped by 1 per cent in June — the third fall in a row as the cost of living takes its toll on consumers, the British Retail Consortium said

Many shoppers downgraded to cheaper brands or cut items from their grocery lists completely, the report by the BRC and KPMG consultancy found.

The trade association’s measure of retail sales declined by 1.3 per cent from a year ago in the period through to July 2. This followed a 1.5 per cent drop the month before.

“Sales volumes are falling to a rate not seen since the depths of the pandemic,” Helen Dickinson, chief executive of the BRC, said.

Almost half of consumers have begun to reduce energy and water consumption to cope with rising bills.

Utility costs have soared 40 per cent from a year ago, according to Barclaycard, which published a separate report. That means less money for other items.

Even a boost from the queen’s platinum jubilee celebrations failed to offset the slowdown in 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,” Ms Dickinson said.

“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.”

Inflation has already hit a 40-year high of 9.1 per cent and is set to soar past 11 per cent in the autumn, as the energy price cap is set to be increased once more.

The BRC is calling on the government to help the retail sector by taking action to lower business rates as firms face being “caught between significant rising costs in their supply chains and protecting their customers from price rises”.

The sales monitor data showed non-food retail sales have suffered the most amid the cutback on discretionary spending, down 3.3% on a total basis in the three months to June and 4.2% lower on a like-for-like basis.

Barclaycard, which manages about a third of the credit and debit card purchases in the UK, said spending in supermarkets fell 0.8 per cent from a year earlier while outlays on essentials increased by 4.4 per cent. It found spending on non-essentials slowed sharply.

“The outlook continues to be challenging, although good weather might provide a welcome boost in July,” said Susan Barratt, chief executive of research company IDG, which contributed to the survey. “We’re forecasting that food inflation will reach 15 per cent this summer.”

Gabriella Dickens, senior UK economist at research consultancy Pantheon Macroeconomics, said that while the immediate picture shows belt tightening, consumer spending should strengthen later this year.