Cost of living crisis weighs on retail sales as inflation soars

Retail sales rose at their lowest pace since February 2021.
// The UK saw its weakest like-for-like sales growth last month since February 2021, figures show
// But the fashion sector continues to outperform the lifestyle and homeware sectors, recording total sales growth of 15.2%

UK retail sales rose to their lowest rate since February 2021 as high inflation and a worsening cost of living crisis constrain consumer spending, according to the latest BDO High Street Sales Tracker.

Total like-for-like sales in June were up 8.4% from a year ago, with an 8.8% drop in household goods sales suggesting Britons are postponing major purchases as the bites.

However, the fashion sector proved to be strong, outperforming the lifestyle and home goods sectors, recording total sales growth of 15.2% – the 16th consecutive month of positive figures.


By contrast, sales of lifestyle products through online channels fell for the eighth consecutive month, raising concerns that consumers are cutting back on discretionary spending in the sector.

Sophie Michael, head of retail and wholesale at BDO, said: “These results confirm that the outlook for retailers is cause for concern. With consumer confidence at historic lows, real wages falling to their lowest level in 20 years and interest rates set to rise further, there are few signs of encouragement for retailers.

“The fashion sector has undoubtedly been boosted by consumers refreshing their wardrobes for the summer holidays. However, weak sales growth from online retailers and negative results from the home goods sector are key indicators that consumers are tightening their purse strings on discretionary spending, and big ticket items in particular.

“Retailers who have accumulated high levels of inventory now face a real challenge: with their own cost base growing, they cannot afford to reduce it to increase sales, but neither can they afford to reduce it. afford to sit on unsold items. Effective management of inventory levels and working capital will be essential for retailers to trade successfully during this time of unprecedented challenge.

“Ultimately, however, retailers will look to government to use the levers at its disposal to control inflation, ease the cost of living crisis and create the economic conditions for the retail sector to prosper.”

The BDO figures come as total footfall in the UK fell 10.5% in June from three years earlier, according to data from the British Retail Consortium (BRC)-Sensormatic IQ.

High street footfall fell by 13.9% in June 2019, while footfall in shopping centers fell by 24.1%.

BRC chief executive Helen Dickinson said: “Rising inflation, particularly soaring energy costs, is limiting customers’ purchasing power and hurting consumer confidence.

“It should only get worse in October as the energy price cap rises and colder weather increases usage.

“With many people struggling, retailers are doing all they can to support their most vulnerable customers – from expanding value ranges to offering discounts to vulnerable groups, increasing staff salaries and investing in lower prices for the future.”

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