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UK retail sales hit by surprise downturn despite big discounting | Business

Britain’s shops were hit by a surprise downturn in sales in the run-up to Christmas after official figures showed a 0.1% drop in October.

City analysts had expected consumers to continue their month-on-month spending increases with a 0.1% rise, albeit largely built on heavy discounting by retailers.

The fall in sales represented the weakest monthly figure since April last year and appeared to show shoppers had become reluctant to spend before the proposed 31 October Brexit deadline.

There was also speculation that recent declines in employment and wages growth had deterred consumers from spending on big-ticket items such as furniture and cars.

Sales fell in all main retail sectors apart from food stores. Once petrol and diesel sales were stripped out the drop was even more severe at 0.3%.

The Office for National Statistics said department store sales rebounded in October driven by promotional events and an earlier introduction of Christmas lines. However, sales in the sector remained significantly down over the longer term, it added.

The consultancy Capital Economics said a wetter and colder October than normal was expected to boost clothing sales, but instead they fell by 1% from September.

“In fact, the only bright spots were a 2% increase in department store sales volumes, which may have been helped by an early start to Christmas discounting. A 1.5% increase in fuel sales also helped increase the monthly figures. Excluding fuel, retail sales fell by an even sharper 0.3% month on month,” said Thomas Pugh, one of the firm’s UK economists.

In September sales were flat and the value of sales dropped 0.2%, marking a period of stagnation since the summer.

Howard Archer, the chief economic adviser to the EY Item Club, an economic forecasting group, said the recent softer retail sales data suggested consumers may have become more concerned by the combination of a struggling domestic economy, heightened domestic political and Brexit uncertainties and a deteriorating and more fractious global economic environment.

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“Furthermore, there are signs that the fundamentals for consumers have come off their recent highs,” he added.

Philipp Gutzwiller, the head of retail at Lloyds Bank Commercial Banking, said the dip in sales would be a major concern for the sector as it heads into the busiest trading period of the year.

He added: “Consumers are increasingly seeking bargain prices sooner rather than later, so the challenge will be pitching those big-ticket items at the right price while avoiding a race to the bottom.”

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