Retailers suffered a “lacklustre” January as bad weather and cost of living pressures discouraged shoppers from opening their wallets after Christmas, according to new research.
Total retail sales across the UK increased by only 1.2% year-on-year in January – down sharply from growth of 4.2% during the same period last year, figures from the British Retail Consortium (BRC) and KPMG said.
Separate figures from Barclaycard also found year-on-year consumer card spending grew by just 3.1% over the same month.
It blamed the recent cold weather – including from Storm Isha and Storm Jocelyn – for putting off shoppers from visiting high streets, and claimed Britons were instead “embracing nights in” by watching TV hits such as The Traitors.
The BRC said January sales discounting helped boost spending in the first two weeks of the post-Christmas period, but added the trend was “not sustain[ed] throughout the month”.
Chief executive Helen Dickinson said: “Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year.”
Clothing and footwear sales also performed poorly, although there was an upward trend for health and beauty products, she added.
Linda Ellett, KPMG’s UK head of consumer markets, leisure and retail, described the high street’s performance as “lacklustre” and said the “feel-good factor” from falling mortgage rates and easing inflation had yet to materialise at the tills.
She said: “It may be a new year, but the hangover of low consumer confidence remains.
“The extraordinary weather conditions across large parts of the country did little to encourage shoppers out on to the high street, whilst continued industrial action on the rail network was unhelpful for city centre locations.”
It comes after official figures showed a shock fall in retail sales during the key December shopping period, despite some positive reports by major high street outfits in the run-up to Christmas.
Shelter from the storms
Barclaycard said its below-inflation growth figures suggested “Brits stayed at home to shelter from the cold weather and save money after a busy festive period”.
It said spending on takeaways and fast food was up 5.5% year-on-year in January, with people spending £55 each on average, while household expenses on digital content and subscriptions increased by 11.4%.
Nearly half of 2,000 consumers polled on behalf of Barclaycard said they were using loyalty schemes or vouchers to get money off shopping, while 43% said they plan to cut down on non-essential spending due to rising bills.
But the poll also found 70% have confidence in their household finances – the highest level in its monthly survey since November 2021.
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Karen Johnson, head of retail at Barclays, said: “Brits took on a more frugal approach in January, choosing to stay at home more often to save money and shelter from the winter weather.
“This meant that online retail performed strongly, as shoppers browsed the sales from the comfort of their sofas, while demand for digital content and takeaways remained robust, boosted by the release of popular new film and TV releases such as The Traitors and Fool Me Once.
“While this shift in behaviour resulted in subdued growth for hospitality and leisure, it’s encouraging that confidence is improving, with consumers remaining resilient and finding savvy ways to manage their finances.”
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Jack Meaning, chief UK economist at Barclays, added: “Increasing consumer confidence is a positive message for the UK outlook in 2024, as we see inflation continue to fall, real incomes rising and growing signs that interest rate cuts are coming.
“Spending looks to be on an upward trajectory”.
Looming election
The figures came as the BRC’s Ms Dickinson said she hoped the “next government” could improve the outlook for businesses.
Opinion polls suggest the Labour Party is on course to win the next general election, which many commentators expect will be held this autumn.
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Ms Dickinson said: “With the spring budget in sight, and a general election looming, government cannot afford to ignore the needs of retailers and their customers.
“Employing three million people and supporting families and communities in every corner of the country, retail is the ‘everywhere economy’.
“By addressing the cumulative burdens, from business rates’ rises, to ill-conceived new recycling proposals to border control costs, the next government can unlock retail investment and boost local and national economic growth.”