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Prices fall at retail as consumers spend less

August shop prices fell by 0.4% compared to a 0.1% decrease in July, according to latest figures from the BRC and Nielsen.

This is below the 12- and 6-month average price increases, both of 0.3%, and is the fastest rate of decline since June 2018.

Non-Food prices fell by 1.5% in August compared to July’s decrease of 1.2%. This is below the 12- and 6-month average price declines of 0.6 and 0.7%, respectively. It is the fastest rate of decline since June 2018.

Food inflation eased slightly to 1.6% in August from 1.7% in July. This is below the 12- and 6-month average price increases of 1.8% and 1.9%, respectively.

Fresh Food inflation accelerated in August to 1.4% from 1.2% in July. This is below the 12- and 6-month average price increases of 1.4% and 1.5%, respectively.

Ambient Food inflation slowed significantly to 1.8% in August from 2.4% in July. This is below the 12- and 6-month average price increases of 2.3% and 2.6%, respectively.

Overall prices were pushed further into deflationary territory by Non-Food goods that saw prices decline at a faster pace in August. Out of the seven Non-Food categories, three were deflationary.

The BRC says weak consumer spend and intense competition kept price increases well at bay, with many retailers using discounts, especially for basic items (which are oversampled in our index). Case in point, prices for five categories – DIY, Furniture, Clothing, Electricals and Other Non-Food, are below their August 2015 prices.

Inflationary pressures are receding for some Food categories too. Promotional activity by supermarkets slowed down the rate of price increases for Non-Alcoholic Beverages, Sugar & Confectionary and Bread & Cereals. Meanwhile prices of some Fresh goods declined in response to market developments. For instance, meat prices have been falling for a fourth consecutive month in August, as declines in global meat prices late last year have been feeding through into final consumer prices.

Helen Dickinson OBE, Chief Executive, British Retail Consortium, said:
“Consumers were the real winners this month as prices fell at their fastest rate in over a year. Prices of non-food goods fell at a faster rate than both the previous month and the 12-month average, while food inflation eased slightly due to higher levels of discounting from supermarkets.
“Weak consumer spending and stiff competition has kept prices down in the UK, however a disruptive no-deal Brexit, which would raise the cost of imported goods, could reverse this trend. In the interests of both consumers and retailers, the Government must redouble its efforts to find a workable agreement with the EU that would avoid a no deal scenario.”

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: “August is often a difficult month for retailers made more challenging this year by unseasonable weather early in the month, and we have seen the return of vouchering by many supermarkets and some non-food retailers bringing forward end of season discounts to help drive sales. Consumers remain uncertain about when and where to spend but the good news is that any inflationary cost pressures that may be building in the food supply chain, have not yet reached shop prices.”

Shopping Mall

Retail business rates to rise by £170m in 2020 – Study

The UK’s High Street retailers could be facing a £170m increase in business rates next year.

That’s according to analysis of available data by real estate specialist Altus Group, which says the total business rates rise in 2020 is likely to be in the region of £660m, based on an expected adjustment +2.1% in line with September inflation.

If correct, it’s yet more financial pressure on the High Street, something that the industry is already lobbying the government to address.

Last month fifty major retailer demanded the Government takes action to fix the ‘broken business rates system’. In a letter to the new Chancellor, Sajid Javid, retailers called on the Government to put business rates at heart of the promised new economic package.

The letter, coordinated by the British Retail Consortium, was signed by major retailers including the CEOs of supermarkets, food-to-go, fashion, homeware, and department store retailers.

The letter asked for four fixes that would address many of the challenges posed by business rates:

  • A freeze in the business rates multiplier;
  • Fixing transitional relief, which currently forces many retailers to pay more than they should;
  • Introducing an ‘Improvement Relief’ for ratepayers;
  • Ensuring that the Valuation Office Agency is fully resourced to do its job.

Altus Group’s Head of UK business Rates, Robert Hayton, reiterated the point, telling PA: “With major retail and hospitality businesses reducing their estates and headcount often citing high level of rates as a contributory factor, I urge the Chancellor to take the bold and ambitious step of being the first Chancellor to freeze the multiplier since the national business rates system was introduced in 1990.”

Retailers demand government action on business rates

Over fifty major retailers have come together to demand the Government takes action to fix the broken business rates system, in a move led by the British Retail Consortium (BRC).

In a letter to the new Chancellor retailers called on the Government to put business rates at heart of the promised new economic package.

It was signed by major retailers including the CEOs of supermarkets, food-to-go, fashion, homeware, and department store retailers. 

The BRC says retail remains the largest private sector employer in the UK, employing approximately three million people. The industry accounts for 5% of the UK economy, yet is burdened with 10% of all business taxes, and 25% of business rates.

The letter comes after BRC-Springboard data showed that UK Vacancy figures had risen to 10.3%, the highest since January 2015.

It also comes shortly after the BRC-KPMG Retail Sales Monitor showed the 12-month average sales figures dropped to their lowest level on record, at 0.5%.

The letter asks for four fixes that would address many of the challenges posed by business rates:

  • A freeze in the business rates multiplier;
  • Fixing transitional relief, which currently forces many retailers to pay more than they should;
  • Introducing an ‘Improvement Relief’ for ratepayers;
  • Ensuring that the Valuation Office Agency is fully resourced to do its job.

The letter notes that implementation of these four recommendations “could be undertaken quickly, would reduce regional disparities, remove barriers to the proper working of market forces, incentivise economic investment, and cut away at least some of the bureaucracy of the current system.”

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said:These four fixes would be an important step to reform the broken business rates system which holds back investment, threatens jobs and harms our high streets. The new Government has an opportunity to unlock the full potential of retail in the UK, and the Prime Minister’s economic package provides a means to do so.

“The fact that over fifty retail CEOs have come together on this issue should send a powerful message to Government. Retail accounts for 5% of the economy yet pays 25% of all business rates – this disparity is damaging our high streets and harming the communities they support.”

Image by Steve Buissinne from Pixabay

Summer retail footfall declines, says BRC

Uk retail footfall declined by 2.9% in June, compared to the same point last year when it declined by 0.9%.

According to the latest British Retail Consortium & Springboard data, on a three-month basis footfall decreased by 2.4%. The six and twelve–month averages are at -1.3% and -1.7% respectively.

Meanwhile, High Street footfall declined by 4.5%, following from the increase of 0.1% in June last year. The three-month average decline is 3.5%.

Retail Park footfall increased by 0.1%, following from June 2018 when footfall decreased by 0.4%. The three-month average growth is 0.5%.

Shopping Centre footfall declined by 2.4%, following June 2018’s decline of 3.4%. The three-month average decline was 2.7%.

Helen Dickinson OBE, Chief-Executive at the British Retail Consortium, said: “Poor footfall this June led to a significant fall in the sales figures for the month. High streets were worst hit by the relatively poor June weather, with shopping centres also performing badly, however, retail parks managed to buck the trend. Last year’s World Cup and glorious sunshine set a high bar, which 2019’s slow consumer spending and Brexit uncertainty failed to live up to.

“High streets and shopping centres across the country need to invest in improving their consumer experience if they wish to see these footfall numbers reverse. Unfortunately, high business rates, as well as a raft of other public policy costs, mean there is little left over to spend on these improvements. If the Government wants to see more investment on the high street then they must reform the broken business rates system and give firms the means to make the necessary improvements.”

Diane Wehrle, Springboard Marketing and Insights Director, said: “The drop in footfall in June of -2.9% is disappointing; it was much more severe than the -0.9% drop in June last year and takes the rolling three month average to -2.4% versus -1.5% in 2018.

“However, given the exceptional and ongoing disruptive political and economic period we are facing coupled with unprecedented structural changes in the retail sector, we might actually expect consumer activity to have taken an even greater hit.  In reality, the drop in footfall of -1.4% for the year to date is still an improvement on the drop of -2.1% over the same period last year, so in context footfall performance has shown more resilience over the year to date than expected.

“It was clearly high streets and shopping centres that bore the brunt of consumers railing back on their shopping trips, whilst retail parks maintained their customer base.  However, whilst footfall in high streets across the UK dropped by -4.5% in June, the continuing and growing demand from consumers for experience meant that in regional cities – which by virtue of the sheer breadth and depth of their offer means they can deliver on experience – footfall was far more resilient, declining only very marginally by -0.6%. 

“And the same rule of ‘experience delivering results’ also applies for shopping centres.  Whilst footfall in shopping centres across the UK declined by -2.4% in June, in the largest centres of more than half a million sq ft the drop was just -0.5%, and only -0.1% in those largest centres with a strong dining offer.  So it is clear that consumer demand is polarised between convenience and accessibility provided so effectively by retail parks, and consumers’ craving for experience, driving them towards larger retail destinations.”

Image by Pexels from Pixabay

Latest BRC data paints grim picture for the High Street

Retail has shown its biggest sales decline on record covering the four weeks from April 28th – May 25th, 2019.

Sales decreased by three percent compared to the same period last year, which had then increased by 2.8 percent from 2017, making it the steepest like-for-like decline since December 2008.

Over the three-months to May, Non-Food retail sales in the UK decreased by 1.1 percent both on a like-for-like and on a total basis. This is below the 12-month total average decrease of 0.4% percent, while food sales increased by 0.8 per cent on a like-for-like basis and 1.9 percent on a total basis.

All records exclude Easter distortions, caused by Easter falling in different months in subsequent years.

Discussing the findings, Helen Dickinson, chief executive, British retail Consortium, said: “With the biggest decline in retail sales on record, the risk of further job losses and store closures will only increase. While May 2018 offered almost unbroken sunshine, topped off by the run up to the World Cup and the marriage of Meghan and Harry, May 2019 delivered political and economic uncertainty. Food sales dropped for the first time since June 2016, with further declines in clothing, footwear and outdoor goods.

“With retail conditions the toughest they have been for a decade, politicians must act to support the successful reinvention of our high streets and local communities. Business rates remain a barrier, preventing many retailers from investing in their physical space. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the Government is failing to act. The legislation is falling behind the technological revolution.”

“April may have provided retailers with some light reprieve thanks to Easter, but May’s staggering fall of 3% like-for-like is a stark reminder of the industry’s ongoing issues, which for many require urgent attention, said Paul Martin, head of retail, KPMG.

“We are of course comparing this month’s growth against a stellar May in 2018, but even the 3-month average – which softens the monthly volatility – demonstrates that achieving growth in retail remains a real struggle.

“The bank holiday weekends have given rise to the added interest in furniture and homewares, as shoppers set about making home improvements. However, the weather did little to convince fashion-minded shoppers to refresh their seasonal wardrobes.

“The extremely low growth online is real cause for concern, especially with almost a third of all non-food sales today being made online. This trend has continued to manifest itself over the last year and requires real focus from the retail community.”

Image by Pexels from Pixabay

Retail employment down as market structure evolves

Structural changes in retail triggered by the advent of online sales and other technologies has seen year-on-year total employment drop 2.4 per cent in Q1 2019, a higher reduction than the one in Q4 2018, at 2.2 per cent.

ONS data via the British Retail Consortium (BRC) has also revealed a decline in employment of 2.1 percent in Q4 2018 and 2.9 per cent in Q3 2018.

However, the UK economy as a whole has witnessed the highest record of employment since ONS data records began, a contrast to the downward trend.

17 per cent of retailers indicated plans to reduce staff in the coming quarter, above the comparable figure of 13 per cent last year, and 67 per cent seek to keep their staff numbers unchanged (down from 75% last year).

Store growth was steady at 2.3 per cent in Q1 2019, the same rate of change as in Q4 2018. Positive store growth found in the BRC sample is in contrast to the ONS figures showing that the number of local units is in decline in the UK. This is due to the expansion of smaller format stores by several retailers in the sample.

In Q1 2019, total hours were down 2.7 per cent year-on-year, similar to the reduction of 2.8 per cent of Q4 2018. The majority of survey participants reduced labour requirements compared to last year, with some increasing stores and also hours and employment.

Discussing the ONS results, Helen Dickinson OBE, chief executive, British Retail Consortium, said: “Yet again, the number of retail jobs fell during the first quarter of this year, with a 2.4% per cnet year on year fall in employees; this would be equivalent to losing 74,400 people across the retail industry. While the number of stores rose, this was mainly driven by an increase in small format stores, with many larger stores closing — resulting in a net job loss. And more jobs are likely to disappear unless there is a shift in Government policies. 

“Retail is undergoing a period of unprecedented change in response to new technologies and changing consumer behaviour. The investment required to successfully navigate this transformation is being held back by the rising cost of public policy. Over three million people rely directly on the retail sector for jobs, with many more working throughout the supply chain. Yet spiralling business costs pose a grave threat to these jobs – as recent administrations, CVAs, and store closures show.”

High-Street

BRC demands action on business rates

The British Retail Consortium (BRC) has demanded an end to what it calls the Business Rates burden on UK retailers.

In a submission made to the Treasury Select Committee on April 1st, the BRC set out a framework to fix the business tax system under the principles of Relief, Review and Reform.  

Since being introduced in 1990, Business Rates have risen 45%, from 38.4p to 50.4p in the pound, which the BRC says will mean shops will now be paying over half of their rateable value again in Business Rates before they have even made a penny in sales.

The current system, the BRC argues, is contributing to the rising number of store closures and discouraging new businesses from taking over empty shops.

Under the current system, business owners that make improvements to their shops see their tax bill rise as the rateable value increases. For example, adding solar panels to the roof will result in a firm paying higher Business Rates. 

In addition, the BRC says those firms whose rates bill is found to be too high are forced to subsidise those who are paying too little as the system lacks the flexibility to correct itself quickly. 

The result – retail has seen a drop of 48,000 jobs between 2017 and 2018 even though the economy as a whole added 415,000 new jobs over the same period.

The BRC has called for a number of changes to be made, culminating in an Independent Review of Business Taxation that must look at how various business taxes should be levied to ensure that the tax framework is fit for the 21st century.

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said: “Retail is in the midst of a transformation as new technologies and changing consumer behaviour impact the way we shop. The investment needed for this reinvention is being held back by a rising tide of public policy costs, with Business Rates the biggest among these.  

“Retail accounts for 5% of the economy, yet pays 10% of all business taxes and a staggering 25% of Business Rates. This is simply not sustainable; the raft of shop closures and job losses are testament to that.”

“While Government fiddles at the edges, retail suffers and consumers pay the price. The Treasury Select Committee Inquiry comes at a critical moment for the retail industry. If the Committee can seize the opportunity to find a way to address the madness of a system which is strangling our high streets, they can protect shops and jobs and put British retail on the right trajectory for the future.”

BRC: ‘Britain stands on a knife edge’

Retail leaders have been digesting the implications of the UK’s ongoing Brexit crisis in light of last week’s vote by Parliament to extend Article 50.

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said:
“[The] vote offers a glimmer of hope, but it is now absolutely essential that MPs put aside their differences and coalesce around a positive route forward.

“Without definitive action by MPs in the next six days, we will see the UK crashing out of the EU on March 29th without a deal. This would inevitably lead to higher prices and less choice on the shelves for consumers. The uncertainty surrounding a no deal Brexit is already harming the UK economy.

“Britain stands on a knife edge. Parliament must put an end to this uncertainty.”

The BRC chief exec also issues a statement following the government’s announcement of the ‘no-deal’ tariff schedule.

“At last businesses have some clarity about the tariff schedule they will face under a no deal Brexit. Already hundreds of ships are on their way to Britain and are only now discovering what tariffs they may face.

“Consumers look to be no better off as a result of a mix of tariffs and quotas on food and other products. We remain particularly concerned about tariffs on certain clothes and textiles – a good proportion of which consumers were getting tariff-free from countries like Italy and Turkey.

“However, it is the non-tariff barriers which will have the greatest impact on consumers. Tariffs, checks, and increased documentation requirements will all result in delays, higher prices, and reduced choice for consumers. This is an inevitable consequence of a no deal Brexit.”

“The announcement that there will be no enforcement of custom checks and tariffs moving across the Irish border presents the biggest risk. Without these checks and controls, and with essentially a different tariff schedule in operation, the system would be a goldmine for criminals seeking to take advantage of a no deal Brexit.”

“Parliament must find a way of taking no deal off the table or risk harming the people and businesses of Great Britain and Northern Ireland.”

Shop price inflation at highest for six years

For the first time in almost six years the price of non-food goods has risen, albeit slowly, as cost pressures which had been building in the supply chain over the past few years fed through into prices.

According to the latest figures from Nielsen and the British Retail Consortium (BRC), this adds to gradual ongoing rises in food prices, resulting in the highest overall shop price inflation since March 2013.

Among the key data points are:

  • Shop Price inflation accelerated in February to 0.7%, up from 0.4% in January. This is the highest inflation rate since March 2013.
  • Non-Food prices rose by 0.2% year on year in February compared to the January decrease of -0.2%. This is the first time that Non-Food have been inflationary since March 2013.
  • Food inflation inched up slightly in February to 1.6%, up from 1.5% in January.
  • Fresh Food inflation accelerated to 1.7% in February, up from 1.2% in January. This is the highest rate since January 2018.
  • Ambient Food inflation eased in February to 1.5%, down from 1.9% in January. This is the lowest inflation rate since May 2018.

The key driver of the upward movement in year on year Shop Price Inflation in February was Non-Food, while Food price inflation overall was broadly stable.

In its commentary, the BRC points out February is usually a month when Non-Food retailers introduce new products at full price, after a January of clearing stock and deep discounting. Therefore, it’s no surprise that Non-Food prices are higher month on month.

In contrast, Non-Food prices are higher year on year for the first time in six years. This, the BRC says, reflects the ongoing slow release of significant cost pressures which have built up in the supply chain over the last two years, notably from the currency depreciation in 2016 and the rise in oil prices last year.

However, Non-Food prices remain below levels seen in 2016. And, given weak discretionary spending and intense competition, it is likely that heavy discounting will be back.

Mike Watkins, Head of Retailer and Business Insight at Nielsen, said: “Whilst shop prices have moved upwards slightly in February, economic growth is slowing and there is still weak retail growth. So, for as long as shoppers continue to be cautious, it will be difficult for the industry to pass on in full any cost price increases coming through the supply chain, particularly as around half of households are still reluctant to spend and many have concerns about the economy. Retailers will need to simplify the shopper experience, improve customer engagement and deliver good value for money to encourage shoppers to spend.”

Retail employment’s downward trend continues in Q3

Total hours of retail employment were down 2.1% in Q3 2018 compared to the year-earlier figure, according to the British Retail Consortium’s Employment Monitor.

Meanwhile, store growth slowed to 0.7%, down on Q3 2017 growth of 1.5% and Q2 2018 figure of 1.2%.

The BRC says structural change in retail continues to unfold, with hours in the industry declining over the period July to September – A trend which it says is in stark contrast to the whole UK economy, which continues to see record lows in unemployment.

Hours lost were mainly full-time hours, with retailers using their part time work force more flexibly, offering additional hours instead of increasing full time roles.

The majority of survey participants reduced labour requirements compared to last year, with some increasing stores and also hours and employment.

21% of retailers indicated plans to reduce staff in the coming quarter (compared to 0% at the same point last year).

The BRC says this is surprising given the next quarter is the busiest for retailers. 36% had plans to increase staffing, down from the 50% seen at the same point last year, while 43% were planning on making no changes, compared to 50% last year.

Helen Dickinson OBE, Chief Executive, British Retail Consortium, said: “The retail industry, the country’s largest private sector employer, continues to be under considerable pressure. While pay is growing much faster than in other industries, employment in retail continues to fall. And there are challenging times ahead, with a fifth of retailers indicating plans to reduce staff ahead of retail’s busiest quarter, when normally they would be looking to increase headcount.

“As the Autumn budget looms, the retail industry is looking to the Government to help alleviate some of the pressure of a broken business rates system. An indication that reform is coming would provide welcome relief to the industry and to those who work within it.”