“No-deal” Brexit worries: Caution prevails in retail landscape despite January growth

05 Feb 2019 --- After UK retailers experienced the worst Christmas trading in a decade as sales plummeted during the last festive season before Brexit, the latest figures show a return to growth in January as retail discounts helped to tempt consumer spending. However, the British Retail Consortium (BRC) is mindful that this momentum may not continue once sales have finished and as the UK accelerates towards leaving the EU, the risks of a disruptive “no-deal” Brexit “could see fortunes reversed.”

On a total basis, sales increased by 2.2 percent in January, against an increase of 1.4 percent in January 2018. This was the highest growth since June 2018 and above both the three-month and 12-month averages of 0.8 percent and 1.2 percent, respectively.

In January, UK retail sales increased by 1.8 percent on a like-for-like basis from January 2018, when they had increased 0.6 percent from the preceding year, new BRC-KPMG Retail Sales Monitor January 2019 figures report (covering the four weeks December 30, 2018, to January 26, 2019).

Over the three months to January, in-store sales of non-food items declined 2.6 percent on a total basis and 3.2 percent on a like-for-like basis. This is below the 12-month total average decline of 2.3 percent.

Over the same period, food sales increased 1.3 percent on a like-for-like basis and 2.4 percent on a total basis, the highest since September 2018. This is below the 12-month total average growth of 3 percent, which is the lowest since September 2017.

“There was a welcome return to growth this month after December’s disappointing sales figures. But while retail discounts helped tempt cautious consumers, there is no guarantee this momentum will continue after the sales have finished. And it will not just be brick-and-mortar stores looking nervously to the future, as online sales continued to grow below the long-term trend,” Helen Dickinson, Chief Executive of BRC, explains.

Furthermore, the risk of a disruptive “no-deal” Brexit could see these fortunes reversed. “Unless the Government wants to see well-known brands disappearing from our high streets in 2019, they should work with their colleagues in Parliament to find a solution that avoids the shock of a ‘no-deal’ Brexit on March 29, and removes the risks to UK consumers,” she notes.

The BRC has been calling for clarity for some time, claiming that a “no-deal” Brexit will lead to severe price hikes in the UK.

Just last week, some of the nation’s largest retailers joined forces with the BRC to warn government that a “no-deal” scenario threatens the UK's food security in the short-term – as shelves could be left empty and food prices will spike. There has been a series of warnings over the potential impacts a “no-deal” would bring to the food and drink industry which is enormously susceptible to the trading challenges that a hard Brexit presents. Retailers also warn that stockpiling preparations are being hampered because warehousing space in Britain is running out.

Commenting on the food and drink sector’s performance, CEO of education and training charity for the food and grocery industry IGD, Susan Barratt, says: “Bolstered by the inclusion of New Year’s Eve in the latest figures and relatively mild weather before the recent snowfall, food and grocery sales held up reasonably well in January.”

“Looking to shopper sentiment, we’re seeing polarization in views on quality versus cost. Whereas 14 percent say they will put a greater focus on quality in their food shopping this year, up from 12 percent in December, another 20 percent expect to focus more on price. This compares with 17 percent from the previous month,” Barratt concludes.