As gift retailers revealed in the recent Progressive Gifts & Home Retail Barometer 2017, published in March, the UK economy (67% of respondents), competitive websites (41% of respondents) and competition from multiples (40% of respondents) were the biggest factors having a detrimental effect on business in 2017, with the trend continuing into 2018. According to the CBI survey, retail sales across the board, to include gifts and homewares, grew at a modest pace during the year to May.
“A cold start to the year added to the woes of retailers already facing the twin burdens of higher cost inflation and squeezed household incomes,” commented Anna Leach, the CBI’s head of economic intelligence,“so it’s good to see some modest growth returning to the high street after two months of falling sales. But there’s no let up in inflation for shoppers as prices are still rising strongly.”
She added that although real wage growth is gradually rising, the pace is gradual, meaning that the squeeze on households from higher inflation and subdued wage growth will persist for some time.
“We hear increasingly from our consumer-facing members that they are addressing the pressure on profits through investing in automation and workforce efficiencies,” she continued. “Sharing best practice, engaging staff and improving training opportunities are just a few examples of how retailers can increase their productivity, improving pay and living standards.”
Sales volumes remained a little below average for the time of year with a similar picture expected for June. However, orders placed with suppliers were slightly up over the year to May, with similar growth expected this month. Growth in internet sales volumes in the year to May was largely unchanged compared with April, but are expected to accelerate in June.
For the first time in a year, the survey shows that retailers are expected to cut investment in the year ahead and expect the business situation to worsen over the next three months.
Activity is expected to recover in the second quarter and settle at a quarterly pace of GDP growth of 0.3-0.4%.
Above: Retailers are predicted to cut investment over the coming year, says a survey from the CBI Distributive Trades.
