Shock retail sales slump unnerves High Street amid Bank dilemmas

Shoppers are steering clear of the high street as cost of living crisis grips (PA) (PA Wire)

The biggest slump in retail sales this year sent shivers through the High Street today as shoppers tightened their belts far more severely than expected.

Sales volumes dropped by 1.6% in August — as analysts warned of a retail “winter of discontent” — and far outstripped City expectations of a 0.5% fall. Even in nominal value terms they were down 1.7%.

It was the joint biggest monthly decline since July last year when all Covid restrictions on hospitality were lifted, sending consumers rushing out of stores and into pubs and restaurants.

All the main retail sectors — food stores, non-food stores, online retailing and fuel — fell over the month. The only sector to see increases in sales were newsagents and off licences with tobacco and alcohol stores up by 6.3%.

The proportion of retail sales online fell to 25.7% from 26.3% in July 2022 but is still well above pre-coronavirus levels of just under 20%.

Today’s figures from the Office for National Statistics showed that sales volumes were down 5.4% over the past year although in value terms they were up 5.4%, underlining how the cost of living crisis has left consumers having to pay more to buy less.

The weak retail figures make the dilemma for the Bank of England even more acute ahead of next week’s delayed Monetary Policy Committee meeting.

It may mean that a 0.75% rise is off the table despite inflation at close to 10% and sterling at 37-year lows.

Lynda Petherick, retail lead at consultant Accenture in the UK and Ireland, said: “The sombre atmosphere in the UK this week and news of slow economic growth will be adding to the sense of concern among retailers as the weather gets colder.

“Rising costs remain front of mind, and brands will be doing all they can to minimise outgoings and protect their margins for the months ahead.

“To avoid a winter of discontent and beyond, technology will be crucial to help retailers find a careful balance between product, price and experience to keep customers coming back for more.”

Rosalind Hunter, partner at retail consultancy Simon-Kucher & Partners, said: “The figures released this morning show both value and volume declining for the first time this year, indicating consumers are voting with their feet and switching to cheaper alternatives to keep household finances afloat.”

Government High Streets Task Force expert and ShopAppy founder Jackie Mulligan said: “People just aren’t spending amid the cost of living crisis. They’re tightening their belts and then some.”