British retailers suffer worst sales since Covid-19 lockdowns battered the high street | Personal Finance | Finance

UK retailers experienced an unexpected decline in sales last month, reaching the lowest levels since February 2021 when Covid-19 restrictions were still in place, official data suggested.

The Office for National Statistics (ONS) said that retail sales volumes dipped 0.3 percent in October. The statisticians also revised September’s fall from 0.9 percent to 1.1 percent.

Analysts had expected a rise of 0.4 percent in October, according to a consensus estimate supplied by Pantheon Macroeconomics.

Food shops said their sales had fallen 0.3 percent during the month, a worse result than September, but non-food stores saw a decline of 0.2 percent in October after sales dropped 2.1 percent the month before.

Retailers blamed the cost of living, reduced footfall and wet weather in the second half of October.

Heather Bovill, deputy director for surveys and economic indicators at the ONS, said: “After rebounding in September, fuel sales dipped with increasing prices discouraging customers, while food sales also dropped as consumers prioritised essential goods.

“It was another poor month for household goods and clothes stores with these retailers reporting that cost-of-living pressures, reduced footfall and poor weather hit them hard.

“However, it was a better month for online retailers, the only main sector to report growth in October.”

The ONS reported that although sales volumes declined during the month, there was a 0.1 percent increase in the value of the items sold.

It means that in October this year, people were paying 16.9 percent more to buy 3.1 percent less than they did in February 2020, laying bare the impact of the cost-of-living crisis.

Charlie Huggins, manager of the quality shares portfolio at Wealth Club, commented: “Retail sales volumes in October were a damp squib, falling by 0.3 percent on the back of weaker than expected September trading. Cost of living pressures, reduced footfall and the great British weather all played their part.

“There are signs that cracks are starting to appear in the economy with consumers tightening their belts and switching to cheaper brands. Consumers are still spending more and getting less with retail sales volumes now at their lowest level since February 2021.”

Mr Huggins noted the “good news” is that inflation is moderating, which “provides oxygen” for the Bank of England to start cutting rates. JHowever, he noted: “For retailers, lower inflation isn’t necessarily a good thing, unless it encourages consumers to increase their spending.

“Higher prices have supported retailer’s sales and helped them absorb cost pressures. In a lower inflation world, volume growth will become more important, but that won’t be easy to achieve given current economic pressures.”

For Chloe Moss, the co-owner at Rotherham-based home cocktail gift provider, The Blind Badger Cocktail Company, her business “won’t make it to 2024” if sales don’t pick up.

Ms Moss said: “October was really quiet. If sales don’t pick up between now and the end of the year, we won’t make it into 2024. We’re in a Catch-22 situation as we can’t generate sales without advertising but we need sales to be able to afford to advertise.

“It’s a very sad time for us. Whether you’re an online, brick-and-mortar or hybrid retailer, it’s tough out there at the moment. Let’s hope that inflation falling may leave people with a bit more money in their pockets.”

Earlier this month, a survey from the ONS showed that the rising cost of living has caused around two-thirds (67 percent) of adults in Great Britain to spend less on non-essentials.

Aled Patchett, head of retail and consumer goods at Lloyds Bank, said: “Another dip in sales suggests rising household costs remain at the forefront of consumers’ minds, despite headline inflation easing in recent months.

“The rising cost of living remains a drag on consumers’ discretionary incomes. Households continue to prioritise essential spending, particularly as falling winter temperatures push energy use up and high levels of inflation prevent material downturns in the prices of goods.

“Retailers will now be looking to strike the balance of getting staffing levels right while also being mindful that an early sales offering might not get the tills ringing as loudly as they’d like, as consumers navigate financial challenges elsewhere.”

Racheal Straughan, director of the Newcastle-upon-Tyne-based small retailer e-commerce marketplace, Mayfli, said: “October was another exceptionally challenging month for small retailers.

“Many have experienced lower sales due to factors such as reduced consumer spending and elevated raw material costs. There is a sense that the upcoming Christmas season may not bring substantial improvements, and a growing number of the businesses we work with are considering closing next year if the situation doesn’t improve.

“Overall, for many sellers, 2023 has been even more challenging than the COVID-19 years.”