UK attention to retail: warm June provides boost for UK retailers, although the outlook for 2017 remains flat

August 11, 2017

The UK retail sector experienced strong value and volume growth in June, buoyed by warm weather and resilient consumer confidence. Fashion and department stores drove most of the growth after a difficult May, as customers splashed out on summer essentials.

The Office for National Statistics (ONS) reported value growth of 5.6% when compared against June 2016. Driven largely by rising import costs due to the weaker sterling, retailers have continued to pass on some of the increased costs to customers through higher prices.

Despite growing economic headwinds, volume growth rebounded to 3% as consumers prepared for their summer holidays with the ONS commenting "A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales."

Whilst a welcome relief to retailers in the short term, the rebound does little to dispel the belief that the UK economic outlook will remain sluggish for the remainder of 2017. Scotibank noted that the Bank of England’s opinion on the UK’s economy is unlikely to change drastically "…on the back of sales of paddling pools and flip-flops."

Inflation dipped slightly to 2.6% in June however wages have continued to decline in real terms. If wages continue to stagnate in the face of raising prices, 2017 will continue to be a challenging time on the high street.


Unemployment decreased from 4.6% to 4.5% in the three months to May - the lowest rate since 1972. Wage growth has, however, continued to be outstripped by inflation - contracting by 0.5% in real terms. The unemployment rate in the North East jumped to 6% after five consecutive months of decline.

The Bank of England concluded that the UK has now reached its "natural rate" of employment making any further major decrease unlikely. This is expected to result in upward pressure on wages, however with inflation at 2.6% it is unclear if this will be sufficient to buck the recent trend of contracting incomes.

Consumer credit

Consumer credit reached £200 billion in June, the highest it has been since the 2008 financial crisis.

Increased household indebtedness may indicate that consumers are turning to credit to compensate for the decline in real wages, with the FCA estimating that one in six people with consumer credit are now in financial distress.

Whilst positive in the short-term as an indicator for consumer confidence, regulators are warning that consumers could be unable to repay their debts in the face of contracting incomes and raising inflation. The Bank of England has given lenders until September to prove they are not lending recklessly, which may eventually lead to a decrease in lending which will add pressure to retail expenditure.


The continued trend in footfall showed no signs of easing according to ShopperTrack, with the numbers of consumers visiting the high street decreasing by 3% compared with June 2016.

The East continues to be a difficult market for brick-and-mortar retailers, having experienced the sharpest decline out of all the UK regions for four consecutive months at an average rate of 6.9%.

Yorkshire in contrast has shown some resistance to market trends, with a 0.2% increase in June compared to the previous year and an average month-on-month footfall growth of 1.4% for 2017.

Property prices

Average house prices in the UK rose to £211,301 in June, an increase of £2,591 compared to the previous month. Annual growth now stands at 3.1%, compared to 2.1% in May.

House price growth in London slowed to 1.2%, the weakest it has been in the past five years. This is the second slowest growth of the UK’s 13 regions and represents a reversal of trends seen over the past decade.

Retailers may view this together with the increase in consumer credit as evidence of resilient consumer confidence in the face of an uncertain economic environment.

Meet the Authors