The British Retail Consortium (BRC) has revealed retail sales across the UK were up 4.9% in June 2023. Like-for-like sales in the month were up 4.2% against a fall of 1.3% in June 2022. The three-month average of retail sales totalled 4.6%, while the 12-month average had risen to 4%.
Sales generated by non-food retailers were up 0.3% but only on a total basis. When compared on a year-on-year basis, it is down 0.5% which is reflective of the ongoing tightening of disposable income caused by the cost-of-living crisis.
What was the reason for June’s unexpectedly strong retail performance?
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The stark rise in household spending is attributed to the exceptionally warm and dry June experienced across most of the UK. In fact, the Met Office officially declared it to be the hottest June on record. The most popular non-food items sold included barbecues, swimwear, outdoor games, garden furniture and beach towels.
Nevertheless, Helen Dickinson, CEO of the BRC, acknowledged more consumers were “cautious” about purchasing big-ticket items such as high-tech equipment or furniture. This underlines the ongoing fragility within consumer confidence, with interest rate hikes and the threat of further escalations in mortgages and rents potentially hitting disposable income further.
The RPI tells the full picture of inflation for UK consumers
The UK’s Retail Price Index (RPI) has been a major talking point in the last 12 months as inflation has taken hold fast in the UK economy. All eyes will be fixed firmly on the economic calendar to see what the month-on-month and year-on-year rises are likely to be for June. Forecasts predict the month-on-month rise will slow to 0.3%, down from 0.7% in the previous month. Meanwhile, year-on-year rises are expected to drop from 11.3% in May to 10.9% in June.
It also appears more households tightened their belts and reined in their visits to restaurants in June. According to Barclays, which processes approximately half of the UK’s debit and credit card transactions, restaurant spending declined last month by the highest figure since the turn of the year.
Are there fears that UK retailers may struggle to bring down prices?
During her assessment of the current UK retail market, Dickinson also acknowledged the prospect of retailers being “derailed” in their attempts to reduce prices across the board. Potential reforms to the packaging levy, known as Extended Producer Responsibility, could prove expensive to retailers’ bottom lines. Furthermore, a proposed deposit return scheme could place an initial £4 billion burden on the market, which could also be deemed as an inflationary move.
As things stand, business rates could also be on the rise from April 2024, which could also act as a thorn in the side of retailers. Dickinson has urged the UK government to “think again” about the potential implications of these “costly policies” and their effects on inflation.
In June, the Confederation of British Industry (CBI) published its monthly Distributive Trades Survey, which found that sales volumes in the UK remained at -9% on its benchmark, although this was slightly up from -10% on May.
