Another challenging year for the UK retail sector came to a disappointing close last month, as it suffered weak like-for-like increases in value and volume growth in December. Value increased by 1.1% year-on-year while volume grew by a meagre 0.7%.
Black Friday boosts woeful Christmas trading
Retailers enjoyed successful Black Friday sales, despite forecasts that shoppers would boycott fake bargains in 2019. Barclaycard, which processes £1 in every £3 spent in the UK, saw year-on-year value growth of 16.5% and a 7.2% growth in the number of transactions processed. Perhaps falling on 29 December, and coinciding with the monthly payday for millions of workers, stimulated sales and brought forward some Christmas spending.
The momentum was short-lived however, as December saw the weakest value growth of 2019. The BRC said it was: “The worst Christmas for retailers in 10 years.” The misery was particularly felt by department stores, who saw value decline of close to 5% – unsurprising given the year-on-year decline in footfall.
But it wasn’t all doom and gloom at the subsector level. ‘Other-stores’ saw value and volume growth of 3.3% and 4% respectively, with internet sales rising by 11%.
Footfall continued a downward trajectory, showing no signs of easing in any region. The number of consumers visiting the high street decreased by 5.6% with poor performance coming chiefly from London and the West Midlands, with declines of 8.1% and 7.4%.
What 2020 will bring remains to be seen, but many retailers will be glad to put 2019 behind them.
Labour market buoyant heading into 2020
The UK unemployment rate remained at 3.8% in the three months to November 2019, its lowest since the 1970s and a reflection of the corresponding 11,000 decrease in job vacancies, which fell to 805,000. Meanwhile, the number of people in work rose by 208,000.
Total earnings growth remained at 3.2% in the three months to November, the same as in the three months to October, and the lowest since September 2018.
The latest statistics from the ONS pre-date Boris Johnson’s election success, and retailers will be hoping for a more positive 2020 in the wake of, at last, some degree of Brexit certainty. This could result in improved consumer confidence and an improvement in the UK’s macroeconomic environment.
No change to interest rates despite lower UK growth
November saw consumer credit increase by just £341m, an annual growth rate of 3.0%, considerably below the 5.2% growth rate seen in January 2019.
Moving into 2020, despite speculation around a potential interest rate cut, the Bank of England decided to keep interest rates at 0.75% in January. Retailers will desperately hope the improved business confidence and near- term outlook will help reverse some of the cutbacks seen throughout the past 18 months.
Elsewhere, average house prices in the UK fell by £452 to £215,282 in December, as the property market continued to remain stagnant. Total price growth for 2019 was a modest 1.4% – a trend that is likely to continue throughout 2020 given the ongoing uncertainty around the UK’s future trading relationship with the EU.
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