UK attention to retail: High street avoids the January blues as discounting drives volume growth

March 15, 2019

UK retail kicked off the new year in spectacular fashion, with another month of strong like-for-like growth. Value and volume growth were recorded at 4.4% and 4.1% respectively, driven again by high levels of discounting in what remains an incredibly competitive sector.

Consumer spending has remained resilient in the face of economic uncertainty, benefitting from an increase in promotional offers during the Christmas period and subsequent January sales. This was most acutely felt in the fashion sector, where volume growth of 5.5% outstripped value growth of 4.5%.

Despite the buoyant and consistent growth, retail continues to be a sector of divergent fortunes, with several established retailers entering administration in recent months. HMV entered insolvency proceedings for the second time in six years, blaming a perfect storm of changing consumer behaviour and a decline in demand for physical music and entertainment.

Overall, the UK economy appeared strong in January. Another month of record low unemployment was coupled with the highest real wage growth since March 2011. The rate of consumer credit growth edged up slightly to 4.2%, however this is still substantially below the rate of expansion seen in early 2018.

As the season for discounting comes to an end and the UK economy moves closer to its exit from the European Union, it remains to be seen if the level of growth experienced in the previous two months can continue.


The unemployment rate remained at its historic low of 4% in the three-months to December 2018, the lowest level since 1975. Weekly average real wages jolted upwards to their highest level since March 2011, increasing by 3.4% to £494.50 in the year to December.

After a period of flat wage growth in the face of high inflation, the tightness in the labour market is finally translating into an increase in take home pay for workers. This will be welcome news for the Bank of England, as the overall UK job market appears largely unaffected by the Brexit uncertainty and other economic headwinds.

How this will translate into retail spend remains to be seen, as low consumer confidence may lead to workers choosing to use their increased pay packets prudently as opposed to spending on the high street.


The rate of consumer credit growth increased slightly to 4.2% in January, up from 4.0% in December. This represents the first increase in the growth rate since July, after seven consecutive months of decline.

Unsecured consumer borrowing has slowed sharply in recent months after it was identified as a "pocket of risk" by the Governor of the Bank of England, Mark Carney. This slight acceleration is by no means a return to the 6-7% growth rates seen in the first half of 2018, however it will likely attract the interest of the Treasury if it develops into a trend.


Footfall continued its relentless decline in January, contracting by 1.9% compared to 2018. The decline was most acutely felt in East Midlands and the South East, which saw a contraction of 5.2% and 4.8% respectively.

Interestingly, Northern Ireland once again bucked the national trend, with a 5.7% year-on-year increase in footfall. This represents the fourth footfall expansion in the past six months, a record no other region in the UK comes even close to matching.


Economic uncertainty continued to dampen the housing market, as annual price growth was just 0.1% higher in January compared to the previous year. This comes off the back of a slow December which saw house prices just 0.5% higher.

The uncertainty surrounding Brexit is likely a contributor to the stagnant UK housing market, as buoyant wages and relatively strong economic growth would usually indicate a more bullish market.

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