'Financial Winter' For Shops As EU Vote Looms

A report has blamed uncertainty over the EU referendum and pressure on household budgets for leaving the High Street in a "financial winter" this summer.

As a slew of retailers continue to report tough trading conditions, the BDO High Street Sales Tracker for May recorded a 1.9% drop compared to the same month a year ago.

The accountancy and business advisory firm said the performance meant its measure had shown negative growth each month since October last year, with the exception of January.

It (Other OTC: ITGL - news) suggested that people were still paying for so-called "big ticket" items, such as sofas and fridges, with homeware sales rising 1% over the 12 months reflecting strong pent-up demand and promotional activity.

But lifestyle sales, BDO said, were 2.4% lower as disposable incomes were held back.

The report stated: "The beginning of June may have seen the first signs of summer in 2016, but figures released today show the UK high street is in the grip of a deep financial winter".

Its head of retail and wholesale, Sophie Michael, added: "A fall in retail sales is often sparked by consumers choosing to spend their disposable income on things like eating out, but the evidence is that people are reducing spending across the board.

"Things have been tough for retailers since the end of last summer and there's not much to suggest confidence will pick up soon."

The slowdown in retail sales has coincided with a wider easing in UK economic growth - with economists pointing to uncertainty over the looming referendum vote as a factor alongside concerns for the global economy - led by China's easing.

The reluctance to spend in stores, also blamed on wet and cool spring weather, has forced retailers to adapt their strategies to compete for customers and get stock shifting.

While it can be argued that the collapse into administration of both BHS and Austin Reed in recent months could be put down to struggles over many years, their fate was certainly sealed by customers choosing not to spend enough on their offerings.

M&S, under its new chief executive Steve Rowe, has now announced its intention to distance itself from the profit-protection strategy employed by Marc Bolland and cut prices across the board to attract more fashion customers back from rivals.

The supermarket sector remains in the grip of a price war that has forced the major chains to focus on fewer promotions and offer shoppers a better deal all round. Sainsbury (Amsterdam: SJ6.AS - news) 's confirmed falling sales this week having been the best performer in 2016.

The chief executive of Dixons Carphone (Other OTC: DSITF - news) , the company behind Currys and PC World, told Sky News last month that "consumers have got more canny" and stores are having to tempt people out to spend money.

Seb James added that the days of "showrooming" - where customers go into a store to see products before purchasing for less online - were over as success was now built on offering the same value and service in-store and online.