UK Retail has Largest Slump in Decade

The UK retail industry continues to suffer this month, as the CBI’s recent report shows that consumer spending has fallen in a major way. The recorded slump is the fastest drop in retail sales since 2009.The online retail sub sector has seen an improvement from the lacklustre performance earlier in the year, but the CBI predicts that figures still probably won’t reach previous averages as the months progress.

Key Report Findings

The report gathered information from retailers, wholesalers, and motor traders. The results were as follows:

Causes and Concerns

While there is certainly cause for concern for the retail sector, given the current findings, the CBI’s Chief Economist, Alpesh Paleja, did mention the results should be taken with a pinch of salt. The reasoning is that last year’s World Cup and abnormally hot weather led to a larger than normal rise in high street and retail spending. At the same time, he also pointed out that: “even accounting for both factors, underlying conditions on the high street remain challenging. Retailers are having to continually compete for the attention of value-conscious shoppers, in the age of digital disruption.”.

Additionally, Mr Paleja highlighted the fact that high street retailers are facing a number of other challenges, alongside the competition from online stores. He called on the Prime Minister to take action, stating: ““The new Prime Minister must help support retailers by reducing the high cumulative burden of costs they face. This should start by urgently reviewing the dire business rates system, which is unfairly impacting UK high streets and deterring much needed investment.”.

CBI Economic Outlook

The CBI’s report doesn’t expect the economy to change too much in the coming months, with only minimal growth expected. The real determining factor for economic growth however, rests very much on the outcome of Brexit. According to the CBI’s economic projections, which have been pretty accurate over the last six months, a smooth Brexit is likely to see:

• A gradual improvement in quarterly household spending growth (1.4% – 2018, 0.8% – 2019, 1.4% – 2020), as real earnings start to show more signs of life.
• Business investment growth to pick up modestly from a poor 2018, as Brexit uncertainty lifts and the impact of spending on automation becomes more prominent (-0.5% – 2018, 0.3% – 2019, 1.7% – 2020).
• Slightly more support from government consumption, following announcements of increased spending on the NHS in the last Budget (0.6% – 2018, 1.8% – 2019, 2.0% – 2020).
• Exports to continue growing, supported by firm global growth (1.4% – 2018, 3.0% – 2019, 3.1% – 2020). But a corresponding pick up in import growth (0.4% – 2018, 1.9% – 2019, 2.8% – 2020) means that support from net trade fizzles out.

If the UK doesn’t manage to secure an orderly Brexit however, then these projected figures will be meaningless, according to the CBI’s Director General, Carolyn Fairbairn: “An orderly Brexit next year would see the UK enjoy steady economic growth for the next couple of years. But as the range of recent impact studies show, a no deal scenario would blow these figures out of the water, severely hurting businesses, jobs and living standards.”.