Britain’s retailers suffered from weaker sales last month as mounting uncertainty over the UK’s departure from the EU led to consumers becoming more wary of making bigger purchases before Brexit.
In the latest evidence that momentum in the economy is fading during the weeks before Britain is scheduled to formally leave the EU, the British Retail Consortium (BRC) and accountancy firm KPMG said that total sales growth dropped to 0.5% in the year to February, down from 1.6% a year earlier.
Shoppers were more reluctant to spend on discretionary goods, despite an improving outlook for household finances from fading levels of inflation and the strongest wage increases for British workers in a decade.
Excluding food shopping, high street sales dropped by 0.4% over the three months to February, in a worse outcome than average over the past year, while growth in online sales of non-food items also slowed.
Separate data compiled by Barclaycard, which processes half of the country’s credit and debit card transactions, also suggested on Tuesday that Brexit has curtailed discretionary sales on the high street.
Barclaycard said spending on clothing had dropped by 5.2% and in department stores by 5.5%. Hotel spending contracted by 3.8% and pubs and restaurants – typically stronger sectors over recent months – reported slower sales growth of 7.4% and 3.9% respectively.
Analysts said Valentine’s Day failed to boost sales of stationery last month, while unseasonably hot weather discouraged sales in furniture shops. Fashion retailers and shops selling jewellery and watches also suffered in a difficult month.
The latest evidence of a slowdown in consumer spending follows an unexpected recovery in January, when official figures suggested that steep discounting had helped to encourage shoppers to buy greater volumes of goods after one of the worst Christmas shopping periods in a decade.
Although sales have not entirely collapsed, growth in consumer spending has eased significantly since the EU referendum two and a half years ago, when the drop in the value of the pound after the Brexit vote pushed up the cost of importing goods.
Households have also struggled with weak wage growth and benefit cuts under the government’s austerity policies over the past decade. Average wages after inflation still remain below the peak recorded before the financial crisis, eroding households’ spending power.
Several retailers have run into trouble amid the difficult trading conditions, including high street stalwarts such as Marks & Spencer and Debenhams, which have responded by announcing job cuts and store closures.
Economic growth has come close to stalling point in recent months. Fresh figures due on Tuesday are expected to reveal that the services sector – which includes retail and accounts for 80% of the economy – was likely to have fallen into contraction last month.
Esme Harwood, the director of Barclaycard, said: “Discretionary expenditure has seen a considerable decline – spending at retailers continues to decrease, and even hotels, pubs and restaurants are feeling the impact of cutbacks.”
A Barclaycard survey of about 2,000 people found about one in three Britons have cut back on non-essential times or have shopped more often at discount stores to make their money go further.
Half of adults had concerns that Brexit would damage the UK economy, cause their personal finances to suffer and lead to higher costs of everyday items. Almost a fifth said they were stockpiling essential food items to protect against potential shortages in the near future.
Helen Dickinson, the chief executive of the BRC, said: “With consumers increasingly aware of the risk of a no-deal Brexit, it is likely that uncertainty has driven this cautious approach to retail spending.
“If government wishes to reassure both the public and businesses, they should ensure a chaotic no deal – which would lead to higher costs, higher prices, and less choice for consumers – is taken off the table with immediate effect.”
