The retail sector enjoyed robust growth in July, and once again defied fears of a pre-Brexit slump. Unemployment remained close to 45-year lows, but house price growth continues to stagnate.

Looking forward, an ever-increasing prospect of disruption from a no-deal Brexit continues to threaten retailers operating in an already highly challenging market.

Increasing retail sales mask mixed subsector performances and declining footfall

The UK retail market reported value and volume growth of 3.4% and 3.9% respectively, compared with July 2018, which broadly corresponds to the average rates reported in the last quarter of the year.

However, these relatively healthy figures mask a mixed performance across the subsectors. While other-stores enjoyed another month of strong performance, the department stores subsector continues to stumble, with House of Fraser, Debenhams and John Lewis just some of the retailers reporting challenging trading conditions.

Footfall continues its downward trend in July, as the number of visitors to the high street declined by 4.5% compared to the same month last year.  Exceptional heatwaves, that saw temperatures in parts of the UK soar to record levels, were not enough to reverse the trend, as consumers continue to shift their purchasing habits online.

Facing a myriad of macroeconomic challenges, particularly Brexit, stagnant economic growth and a depreciating pound, the UK retail sector continues to perform remarkably well. However, with Boris Johnson insisting that the UK will leave the EU with or without a deal on 31 October, UK retailers are ramping up preparations for a potentially large economic shock in the coming months.

UK pay growth reaches an 11-year high as employment numbers soar

There was good news from the latest UK job market figures from ONS, as the unemployment rate of 3.9% remained close to record lows in the three months to June 2019, with any Brexit concerns yet to feed into the market. Overall, a record number of 32.8m people were in employment, with wage growth reaching an 11-year high of 3.9%.

Despite the positive headlines, the outlook remains uncertain, and official surveys indicate that British households are more worried about losing their jobs than at any other time in the past five and a half years.

Economic uncertainty continues to impact house prices and consumer credit growth

According to Nationwide, the average price of UK property was relatively unchanged in July at £217,663 – an annual growth rate of 0.3%. House prices are typically tied to economic sentiment, so with falling economic growth and uncertainty around Brexit, it is not surprising that the market remains challenging

Meanwhile, Bank of England statistics show that unsecured borrowing increased by just £619m, to £217bn in June, reflecting year-on-year growth of 2.4% – the lowest growth rate since February 2014.

uk retail value volume aug 2019
uk retail subsector breakdown aug 2019
uk retail footfall unemployment aug 2019