The impact of Brexit and the uncertainty around a deal or no deal scenario continues to be a cause for concern for retailers, but despite this August provided some relatively good news for the sector with another month of year-on-year value and volume growth. Unemployment dropped to a new 45-year low in July, pushing earnings growth to an 11-year-high. In less positive news, footfall, consumer credit growth and house prices continued to decline.

Increased sales rounds off a strong summer of growth for the retail sector

UK retail finished its strong summer with another encouraging month in August, posting value and volume growth of 2.9% and 2.2% respectively. This rounds off a mixed summer for the high street which, despite continued year-on-year growth, also saw several high-profile restructurings, including Debenhams and Jack Wills.

At a subsector level, the strongest performing for the month were non-store retailing and fashion, with weak growth remaining in the department stores subsector that continues to be plagued by underlying structural issues.

The long-term decline in UK footfall showed no sign of abating in August, with data indicating a 4.5% decline compared to last year. The East and Yorkshire and The Humber regions performed particularly poorly, with declines of 7.7% and 6.7% respectively.

Overall, while August was another strong month for retailers, the weak economic outlook and Brexit uncertainties, means business for UK retail remains extremely challenging. As we head closer towards 31 October 2019, the retail sector will desperately be hoping for greater clarity on the UK’s future trading relationship with the European Union to ensure that the sector’s growth run does not come to an abrupt end.

UK pay growth reaches an 11-year high as unemployment declines yet again

The UK labour market continued its positive trend in the three months to July - reporting a new 45-year unemployment low of 3.8%.

With the market close to full employment and with increased competition for labour, UK workers’ total earnings (including bonuses) increased by 4.0% in the three months to July 2019 – the highest figure since June 2008.

Whilst these figures indicate labour market reliance in the run up to Brexit, fears over longer term job losses persist, and it will take time for a clearer picture of post Brexit employment to emerge.

Consumer credit declines, as economic outlook turns dovish

The average price of UK property was relatively unchanged in August at £216,096, reflecting year on year growth of just 0.6%. Despite healthy labour market conditions and low borrowing costs, consumer confidence indicators remain subdued ahead of October’s Brexit deadline.

Meanwhile, with a weak flow of new lending, the Bank of England reported that unsecured consumer borrowing decreased by £180 million in July to £218.0 billion. The 2.2% year on year increase, in comparison to a 5.7% increase last summer, shows that UK consumer borrowing continues to slow sharply despite the low interest rates.

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

The opinions expressed are those of the author(s) and do not necessarily reflect the views of AlixPartners, LLP, its affiliates, or any of its or their respective other professionals or clients. This article regarding UK Attention to Retail - September 2019 (“Article”) was prepared by AlixPartners, LLP (“AlixPartners”) for general information and distribution on a strictly confidential and non-reliance basis. No one in possession of this Article may rely on any portion of this Article. This Article may be based, in whole or in part, on projections or forecasts of future events. A forecast, by its nature, is speculative and includes estimates and assumptions which may prove to be wrong. Actual results may, and frequently do, differ from those projected or forecast. The information in this Article reflects conditions and our views as of this date, all of which are subject to change. We undertake no obligation to update or provide any revisions to the Article. This article is the property of AlixPartners, and neither the article nor any of its contents may be copied, used, or distributed to any third party without the prior written consent of AlixPartners.