The UK retail sector has seen its biggest fall in 12 months as high street traders feel the bite of weak consumer confidence.
Statistics collected by the Confederation for British Industry (CBI) show that 46% of retailers saw a fall in sales for the first half of August, with just 31% seeing a rise in turnover. This makes it the worst month for retailers since May 2010. The Cooperative Group has reported that trading conditions are the toughest they have been in forty years.
The CBI’s Distributive Trades Survey also found that retailers were cutting back on investments due to fear of a second recession. Judith Mckenna, chairperson of the CBI distributive trades panel said “August was a tough month on the high street; consumers have continued to see their incomes squeezed by high inflation and poor wage growth.”
Analysts predict that the situation will worsen for retailers over the coming three months as the cost of recent widespread rioting and looting becomes clear. Richard Lowe, head of retail and wholesale at Barclays said that inflation and lack of consumer confidence were already taking their toll on retailers, and predicted that the effect of the riots would significantly exacerbate the situation.
Several high profile retail outlets are reporting trouble, flooring firm Floors 2 Go have fallen into administration, Topps Tiles has posted a profits warning and the Cooperative Group has revealed a 10% drop in underlying profits, along with a 21% slump in food sales.
This could end up being beneficial to the consumer, as struggling retailers slash their prices in a desperate bid to drum up sales, however, high energy and commodity expenses look set to reign in individuals spending for the foreseeable future..