UK attention to retail: Several household names suffer as retailers endure a meager March

The retail sector continued its modest run in 2018 with another set of lukewarm results in March. An unseasonably cold start and low consumer confidence weighed on sales, with volume growth of 1.1% and value growth of 3.2%.

The difference between these two figures continues to be driven by inflation, which decreased slightly in March but remains stubbornly high.

The composition of the high street continued its dramatic shift, with several household names such as Mothercare, New Look and House of Fraser all turning to Company Voluntary Arrangements (CVAs) as they enter negotiations with their creditors to adapt their retail offering to current consumer needs.

There was welcome news in the UK economy as workers received their first real-wage growth in 12 months on the back of a slight dip in inflation. This will be well received by retailers who have partly blamed their recent difficulties on consumers’ shrinking pay packets.

In another reversal of recent trends consumer credit experienced its first decline in more than 2.5 years. Banks tightened their lending criteria in a move that will likely hit retailers, as consumers can no longer use cheap debt to finance household spending.

All indicators are pointing to a retail environment that will remain turbulent in the face of difficult economic conditions and technological change. Retailers will hope that they are able to weather the storm to remain competitive and relevant in a constantly shifting market.

British workers received an unexpected boost in February, with a fall in unemployment and the first real wage growth in more than a year. Unemployment dropped to 4.2%, the lowest level since 1975, with the number of people employed reaching a record high of 32.2 million.UNEMPLOYMENT

Weekly earnings excluding bonuses increased by 2.8% in the three months to February, slightly outstripping inflation which dipped to 2.7% on the back of a stronger pound. This brings to an end 12 consecutive months of falling real wages, a welcome relief to retailers who felt the sting as consumers cut back on discretionary spending in the face of shrinking pay packets.

CONSUMER CREDIT

In another surprise, consumer credit decreased by £41 million in March, the first decrease since September 2015. The Bank of England reported that 38.7% of lenders saw the availability of consumer credit fall in the three months to March, as perception of the riskiness of this debt increased.

The report will no doubt be well received by Mark Carney, Governor at the Bank of England, who had previously described the recent rapid growth of consumer credit as a “pocket of risk” and had actively encouraged banks to tighten their lending criteria.

FOOTFALL

The last days of the Beast from the East delivered the sharpest decline in footfall in eight years, dropping by 7.2% on a like-for-like basis. This marks the 26th month of consecutive decline, however the size of the decline in March emphasises that the transformation of the high street is far from over.

The story was not the same across the entire country however, with the South West and Wales declining by 12.5% and South East and London expanding by 3.5% and 10.2% respectively.

PROPERTY PRICES

House prices increased modestly by 2.1% when compared to the previous year, with the average house price now standing at £211,625. This represents a 0.2% decline over the month, after accounting for seasonal factors. This is reflective of the dampened consumer confidence, despite the record low unemployment and low interest rates.

The gap between house prices in the north and south has narrowed again for the fourth consecutive quarter. London experienced a 0.5% price decline over the last quarter as the UK’s worst performing region, whilst the West Midlands experienced a 5.2% price increase. The gap between the North and South still remains vast however, despite recent improvements, with a typical house in the North costing £163,138 compared to £331,047 in the south.