As Fuel & Food Prices Soar, Consumers Tighten On Retail Spending

As UK consumers feel the real impact of the rising cost of living the latest data from the Office for National Statistics (ONS) reveals that the retail sector has felt the impact with sales figures dropping by 0.3% last month.

The sales decline comes at a time when the UK Prime Minister, Boris Johnson has admitted he and his government must do more to deal with the current financial pressure that households are experiencing.

Last week, Chancellor of the Exchequer, Rishi Sunak received criticism for failing to do enough in his actions set out in the Spring statement.

Sunak announced measures that would amount to “a £6 billion personal tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year,”. This included cutting fuel duty and a promise of income tax relief, but not until 2024 when it is believed the UK economy will be more robust.

Johnson remarked that the reality of the current cost of living crisis was “the single biggest thing we’re having to fix.”

As petrol and diesel prices in the UK hit record highs, shoppers are focussing on essential purchases and retailers have felt the impact. Throughout March, non-store retailing sales have fallen by 4.8% compared to the previous month which has seen a growth of 4%.

Food sales volumes also declined by 0.2% but there was an increase in clothing sales of 13.2% suggesting there is still pent-up demand from consumers.

It was online retail that saw a significant sales drop by 27.8% as shoppers seem to be using traditional stores more – a sure sign that the high street is indeed not dead, but evolving.

Clearly it will remain a challenging year ahead as the reality of rising living costs continues to compress spend.

The Office for Budget Responsibility which was created to provide independent analysis of UK’s public finances, warned that living standards would face the biggest fall in a single year since records began in the 1950’s.

The impact is certain to slow any signs of a post-Covid financial recovery and retailers will be relying on promotion to counter-balance the squeeze. Further pressure is on the horizon with a continued rise in energy prices and inflation which has already risen by 6.2% in the year up to February and could go up to 8% by Spring according to the Bank of England.

As retailers prepare for the Easter holidays, the second biggest annual occasion for sales in the UK, it will be with an eager anticipation to understand how consumers will react. It is the first Easter since 2019 without Covid restrictions enabling families to celebrate together yet many will be brutally aware of the restrictive financial situation and the stark warning that things may get worse.

Source: Forbes