Retail sales in Britain have fallen at a steep pace in the year to August, according to monthly data from the Confederation of British Industry (CBI). The decline is attributed to weak consumer demand, with a balance of retail sales volumes falling to minus 48 per cent, down from minus 26 per cent in July.
The heatwave has piled pressure on the high street, with consumers unwilling to go out and spend once the temperature tops 25C, a survey from Barclays suggests.
Retailers’ struggles
Retailers have suffered in the heatwave as shoppers deem it too hot to shop. The CBI’s lead economist, Martin Sartorius, said: ‘Retail firms grew more downbeat in August as they grappled with sharply falling sales volumes.’ Sentiment about the wider business environment also took a tumble, declining to minus 29 per cent in August from -15 per cent in May.
They are continuing to cut investment and jobs. Sartorius added that the government must consider the steps needed to restore confidence in the sector, including meaningful business rates reform and cutting employer national insurance contributions to support hiring.
Cost of living rises
Apart from facing steeply rising costs, retailers may be on the sharp end of falling consumer demand as the cost of living rises. The energy regulator Ofgem revealed that tariffs are on course to rise to a three-year high, representing a typical £60, or 4 per cent, added to annual bills, taking them to £1,723.
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Experts at consultancy Cornwall Insight expect an even steeper rise of 9pc to £1,872 in January, adding to pressure on households this winter. The prospect of rising joblessness is also weighing on consumer confidence, according to a recent survey by S&P Global.
The extended heatwave, with temperatures often reaching 30C over recent weeks, may also have proved unhelpful. However, some retailers have benefited from the weather, with garden centres and cool summer clothing sellers seeing an increase in sales.
Investment in cooling
Firms are prioritising investment in keeping cool, including air conditioning and ventilation, a report from Barclays found. Air conditioning suppliers are also seeing an increase in cash inflows, up 4.3 per cent compared to the same month last year.
Official figures have painted a mixed picture of the summer so far for the high street, with retail sales rising 0.7 per cent in June but falling 0.5 per cent in July, according to the Office for National Statistics.
One thing is certain – the high street is facing significant challenges, from rising costs to changing consumer behaviour. Retailers will need to adapt to these changes if they are to survive and thrive in the current economic climate.
