UK attention to retail: Low volume growth in December takes a toll on many high street heavyweights

February 13, 2018

December and the Christmas period proved a challenging month for many established UK retailers. A number of well-known brands such as Debenhams and Marks and Spencer all reported a decline in sales. Online sales, in contrast, proved the decisive winner of Christmas trading, with ASOS and BooHoo both posting high growth.

Overall, the results continued the relatively weak market expansion seen in November with value growth of 4.1% translating to modest volume growth of 1.3%. Inflation, which stood just below 3% in December, is likely responsible for the gulf between those two figures.

Many retailers blamed December’s modest numbers on Black Friday, which pushed up Christmas spending a few weeks earlier for consumers seeking to take advantage of substantial discounts. Yet that explanation does not necessarily add up when we consider November’s relatively weak year-on-year volume growth of 1.5%.

Real wages continued to decline despite another month of historically low unemployment. Meanwhile, consumer credit continued to rise. If this pattern continues, retailers are likely to feel its effects as consumers cut down their discretionary spending and look for lower-cost alternatives.

Our main focus as we head deeper into 2018 will be the impact of the UK’s uncertain economic future on the high street and consumer spending, including the impact of Brexit and the country’s stubbornly high inflation.


Unemployment remained at the historic low of 4.3% in the three months to November 2017. Labour demand showed no signs of slowing down despite Mark Carney acknowledging that the UK is at “virtually full employment” with outstanding vacancies standing at 810,000—the highest figure since comparable records began in 2001.

Wage growth of 2.4% remained below inflation of 3.1%, continuing the decline of real wages that we have seen in the past nine months. Normally, low unemployment would boost real wages, but an increase in self-employment may have softened this relationship.

Consumer credit

Consumer credit rose again in December to £2.07 billion, a disappointing result for the Bank of England. The UK’s central bank had hoped that the November interest rate raise would have reduced demand for more borrowing. Consumer credit, which Bank of England Governor Mark Carney described as a "pocket of risk," will remain a concern as consumers top up their shrinking pay packets with short-term credit.

A recent study by the FCA showed that 89% of credit card debt is held by consumers who were also in debt two years ago. This shows the difficulty consumers are having in fully paying off their short-term debt, which is likely compounded by the decrease in real wages seen over the majority of 2017.


Footfall contracted by 3.7% in December 2017, the 23rd consecutive month of year-on-year decline. Taken with the rest of 2017, December’s footfall contributed to an average monthly footfall decline of 2.8% in 2017. The West Midlands performed particularly poorly after a snowy December deterred visitors to the high street, with a 7.9% contraction.

Many retailers blamed December's light footfall on a combination of poor weather and Black Friday reducing end-of-year sales. But the dismal trend could point to a more fundamental shift in the role the high street plays in the Christmas period.

Property prices

House prices rounded off the year in a similar fashion seen throughout 2017, with modest growth of 2.6% compared to December 2016. Growth has consistently been within the 2-4% range, a noticeable slowdown from the 4-6% seen in 2016.

London has long been seen as the driver of the UK property market, with many of the other regions in the UK struggling to keep up. However in 2017 many of the regional disparities that have been the hallmark of the UK property market softened, with London ending the year as the worst performing region with a 0.5% decline. The West Midlands, in contrast, had the highest growth, with an impressive 5.2% increase.

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