Retail Industry Experiences its Strongest Growth in Half a Year

October 8, 2024 TruthUSA

The retail sector performed better than expected ahead of the October Budget, which is anticipated to bring spending cuts and tax increases.

Retail sales received a boost as Britons prepared for back-to-school season, marking the sector’s strongest growth in six months. Household budgets appeared to be slightly less constrained compared to the previous year, according to new data.

In September, a surge in total retail sales by 2.0 percent on the year was driven by purchases of coats, boots, and clothing for the new academic year. Although sales growth was slightly lower than the same period last year (2.7 percent), it exceeded the 12-month average growth of 1.1 percent.

The cold and wet weather in September prompted Britons to shop for seasonal clothing, including extra layers and wet weather gear. The start of the school year also contributed to increased sales in children’s clothing, footwear, and accessories as some parents felt less constrained by household budgets compared to the previous year.

Food and non-food sales both saw year-on-year growth in September. However, while food sales rose by 3.1 percent over the three months to September, non-food sales decreased by 0.3 percent.

“Grocery retail market growth slowed down with the transition to autumn. Although September’s sales were higher year-on-year, the increase rate decreased compared to August, likely due to wet weather and cautious economic messages from the government,” stated Sarah Bradbury, the chief executive at IDG.

All Eyes on the Budget

Helen Dickinson, the BRC Chief Executive, highlighted the retail sector’s better-than-expected performance, driven by a last-minute surge in purchases of computers and clothing for the new academic year. However, consumers remained cautious about making large purchases.

“Consumer concerns about the financial outlook continued to impact demand for big-ticket items such as furniture and white goods,” Dickinson explained.

Chancellor Rachel Reeves is set to announce spending cuts and tax increases on Oct. 30, during Labour’s first Budget. The government has warned about a “£22 billion black hole” in public finances, potentially leading to tough decisions on spending despite assurances that economic growth goals won’t be undermined by the budget.

As shoppers prepare for the upcoming winter months, the looming impact of a “painful” budget and rising energy prices are likely to affect consumer confidence.

“All attention is now on the budget and its implications for household spending in the final quarter of the year,” Ellett remarked.

Retailers are eagerly awaiting the Autumn Statement, a crucial period leading into the “golden quarter” before Christmas, when sales typically peak.

This year, retailers have started seasonal planning earlier than usual, aiming to capitalize on the upcoming key trading period,” as per Bradbury.

Investment Capacity

Despite cost-of-living concerns, weak consumer confidence, and high business rates, retailers are limited in their investment capabilities.

Dickinson urged the government to introduce a 20 percent Retail Rates Corrector—an adjustment in business rates paid on retail properties—to encourage investment nationwide.

Over 70 retail CEOs have appealed to Reeves to implement the corrector.

“We believe it’s time to create a level playing field among industries with a retail rates adjustment, fulfilling a manifesto commitment,” the retail leaders conveyed in an open letter to the chancellor.

They pointed out that a 20 percent adjustment could rectify the imbalance, as the retail sector pays 7.4 percent of all business taxes, a proportion 1.5 times greater than its contribution to the overall economy.

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