LONDON — Brits are cutting down on clothing, household, and other non-food spending as Brexit inflation drives up food prices.
The British Retail Consortium (BRC) on Tuesday announced that total sales fell 1% in March compared to the same month a year earlier. It marks the first decline since August last year.
Measured over a 3-month period, non-food sales fell 0.8%. That is the largest monthly fall in almost 6 years and means the BRC’s measure of non-food sales has endured the longest losing streak since 2008.
Spending on food jumped 1.2% in March. But Paul Martin, head of retail at KPMG, said in a statement: “Food sales remained in the black for a full quarter, although this is largely being driven by rising inflation, so no reason for too much celebration.”
Helen Dickinson, CEO of the BRC, said: “Food sales continue to outperform non-food sales as shoppers focus their spending on essential items. This marginal growth in food was bolstered by slightly higher shop prices following increases in global food commodity costs and a weaker pound.”
The pound collapsed to multi-year lows against the euro and dollar in the wake of last year’s vote to leave the European Union. This has made the cost of imported goods — everything from fresh fruit to clothing — more expensive. To absorb the price rises, consumers are choosing to cut down on clothing and household shopping but keep their eating habits consists.
Dickinson says: “The pressure on prices continues to build, albeit slowly, and will inevitably put a tighter squeeze on disposable income and so to ensure consumers continue to enjoy great quality, choice and value on goods, securing tariff free-trade must be the priority as the Brexit negotiations begin in earnest.”
The sales figures underline the fact that 2017 is set to be a tough year for retailers. UBS recently predicted a crunch for the likes of Debenhams and Marks & Spencer as consumers feel the inflationary pinch and stop spending.
JD Sports executive chairman Peter Cowgill warned in the company’s full-year results on Tuesday that “there are external influences which may impact the latter part of the year, notably inflationary pressures arising from Brexit.” (Still, JD had a blockbuster year last year, reporting a 31% rise in revenue to £2.3 billion and an 81% rise in pre-tax profit to £238.3 million.)
Several retailers have already gone bust in 2017, as tough market conditions bite. Jaeger fell into administration on Monday, while both Agent Provocateur and Jones the Bootmaker have been bought out of administration.
Martin says: “Retailers will be hoping Easter boosts retail sales in April, whether it’s shoppers making the most of the holiday or those choosing to spruce up their homes.
“The new tax year marks further pressure on margins in the form of the apprenticeship levy and business rate changes, therefore tighter cost management and a focus on efficiency is more important than ever.”