Insight

UK attention to retail: robust sales continue into April as the UK retail market experiences strong growth

June 2017

Retailers experienced a buoyant month of value and volume sales growth, despite the continued erosion of real incomes from low wage growth and inflationary pressures.

The UK retail market reported value and volume sales growth of 6.5% and 4.5%, respectively, during April—a marked improvement that retailers will be hoping continues.

The sector continues to be affected by a weak currency, particularly groceries, impacting supply chains and squeezing bottom-lines. Prices on the shelves continue to rise more slowly than cost prices, and retailers are experiencing a squeeze on margins.

The late Easter school holidays and warmer weather provided a boost to sales in several subsectors, particularly food and fashion. However, high street retailers continue to experience a drop in consumer footfall and loss of sales to online competition, a trend that continues to drive many retailers to ramp up their ecommerce strategies.

As consumer credit card borrowing spikes, real incomes diminish, and house price growth slows, many economists are not expecting the buoyant sales to continue.


 


 



Unemployment

The ONS reported that the unemployment rate dropped further, from 4.7% to 4.6% in the three months to March 2017.

Despite the decrease in unemployment rates, wage growth remains low and inflationary pressures continue to contribute to consumers’ sluggish spending patterns. This is expected to continue throughout the remainder of the year as retailers brace themselves for further fluctuations in consumer spend.

Consumer credit

In April, the UK experienced the fastest rate of credit card borrowing growth for 11 years, a rise of 9.7% on the previous year, according to latest Bank of England figures.

Total UK consumer debt rose 8% year-on-year to £198.4 billion, of which credit card debt totalled £68.1 billion.

Footfall

The number of visitors to UK high streets and retail parks continued to decline into April; footfall dropped 2% year-on-year.

This trend looks set to continue, as the Midlands and East of England bore the brunt of the decline. In contrast, Northern Ireland and Yorkshire saw promising increases in numbers through the door during the month.

Property prices

Nationwide has reported UK annual house price growth to be at its slowest in nearly four years. The average UK house price was £207,699 in April, an increase of £391 month-on-month and a 2.6% increase from April last year.

According to Bank of England figures, despite a marked slowdown in house price growth, mortgage approvals for house purchases have remained relatively stable, falling slightly to 64,600 in April from 66,000 in March. House prices over the course of 2017 are expected to increase by around 2%.

Although it is likely too early to speculate as to the reason for the current slowdown in house price growth percentages, political and economic uncertainty, coupled with a stagnation in households’ real wages, could be influential. Following the UK General Election announcement, retailers will be hoping consumer confidence and spending are not further damaged by ongoing uncertainty.

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