UK retailers suffer fastest drop in sales since the financial crisis

UK retail sales volumes fell in the year to June 2019, at the fastest pace since March 2009. That’s according to the latest Industrial Trends Survey by the Confederation of British Industry (CBI). The poor performance was likely impacted by the relatively cooler weather compared with this point last year. The survey of 88 firms, including 45 retailers, judged sales for the time of year to be below average, although to a lesser degree than in May.

Within the retail sector, grocers were the largest contributors to the fall in sales volumes, with the hardware and DIY subsector and the footwear and leather subsector also reporting declines. Notably, the only subsector to see rising sales this month was non-store (i.e. internet and mail order) retailers.

But internet sales across the retail sector stalled in the year to June, marking the weakest growth since the question was first introduced to the survey (in 2009). Internet sales growth is expected to pick up next month, albeit at a pace well below the long-run average.

Recent data suggests that UK economic growth has slowed noticeably in the second quarter of 2019, as the boost from stockpiling activities in Q1 fades. The CBI expects the UK to return to a subdued growth path further ahead, although risks from Brexit uncertainty and global trade tensions remain heightened.

Government must urgently review the business rates system

CBI Principal Economist Alpesh Paleja commented: “This month’s drop in sales should be taken with a pinch of salt, given the backdrop of last June’s heatwave and the start of the World Cup. But even accounting for both factors, underlying conditions on the High Street remain challenging. Retailers are having to continually compete for the attention of value-conscious shoppers, in the age of digital disruption.

“The new Prime Minister must help support retailers by reducing the high cumulative burden of costs they face. This should start by urgently reviewing the dire business rates system, which is unfairly impacting UK high streets and deterring much needed investment.”

Key findings from the survey

Retailers:

  • 16% of retailers said that sales volumes were up in June on a year ago, while 58% said they were down, giving a weighted balance of -42%.
  • 16% of respondents expect sales volumes to increase next month, while 27% expect a decrease, giving a balance of -11%.
  • 15% of retailers placed more orders with suppliers than they did a year ago, while 48% placed fewer orders, giving a balance of -33%.
  • 26% of retailers reported that their volume of sales for the time of year was good, while 45% said it was poor, giving a balance of -19%.
  • Internet sales were broadly flat on a year ago (+3%), following growth in the previous month (+38%). Internet sales growth is expected to pick up in the year to July (+23%), but remain weaker than the long-run average (+46%).

Wholesalers:

  • 31% of wholesalers reported sales volumes to be up on last year, and 22% said they were down, giving a balance of +9%. Volumes are expected to fall slightly next month (-4%).
  • Orders placed upon suppliers fell (-10%), with a slower decline expected in the year to July (-4%).

Motor traders:

  • 10% of motor traders reported that sales volumes were up on a year ago, while 51% said they were down, giving a balance of -41%. Volumes are expected to be broadly flat next month (-3%).

Is your business struggling to compete for the attention of value-conscious customers? For advice on enhancing your offer and weathering the current uncertainties, email me or call me on 020 7099 2621.