The British Retail Consortium (BRC) has released its forecast for the retail sector in the UK in 2023, and the outlook is not very promising. According to the BRC’s analysis, retail sales will only experience modest growth of between 2.3% and 3.5% this year. This projection is particularly concerning considering the persistent high level of inflation, which is expected to remain in the high single digits throughout the year.
The BRC highlights that the retail sector has been experiencing sluggish growth over the past year, with volumes of sales falling compared to 2021 due to below-inflation growth. This trend is expected to continue into 2023. Interestingly, the BRC also predicts that food sales will continue to perform better than non-food categories as consumers prioritize essential purchases over discretionary ones.
Despite these challenges, the BRC anticipates a pickup in sales during the second half of the year as inflation gradually slows down and consumer confidence improves. However, even with this expected boost, the BRC’s forecast for the second half of the year only projects growth of between 3.6% and 4.7%. Additionally, the projected growth for the second half hides an even bleaker forecast for the first half, with sales expected to rise only between 1% and 2.3% during that period.
The BRC also points out that the total retail sales growth for 2022 was a meager 2.3%. When taking into account the impact of inflation, which reached over 11% across the economy, the result was a decline in sales volumes for both food and non-food items. Kris Hamer, Director of Insight at the BRC, warns that the first half of the year will likely be challenging for both households and retailers. Despite appearances of rising sales due to ongoing inflation, the BRC expects actual volumes to decline as consumers continue to carefully manage their spending.
Hamer also draws attention to the fact that there are no signs of retailers’ input costs easing. Energy costs in particular are expected to rise by £7.5 billion as the government’s Energy Bill Relief Scheme concludes in March, adding further upward pressure on prices. However, there is some cause for optimism in the second half of 2023. Inflation is expected to ease, and as consumer confidence strengthens, there may be an improvement in sales growth and volumes.
Overall, the BRC’s analysis suggests that the retail sector in the UK should not anticipate significant growth in 2023. The combination of high inflation and consumers prioritizing essential purchases is expected to create a challenging environment for both retailers and households. However, there is hope for improvement in the second half of the year as inflation eases and consumer confidence strengthens.
In light of this analysis, it would be useful to explore potential strategies that retailers can adopt to navigate the challenging retail landscape in the UK. The following links provide useful insights and recommendations for retailers:
1. Retail Gazette: Strategy – This resource offers a variety of articles and reports that discuss retail strategies, including topics like pricing, marketing, and expanding into new markets. Retailers can find valuable insights to help them adapt and succeed in the current retail climate.
2. Retail Dive: Marketing – This website provides a range of articles and analysis focused specifically on marketing strategies for retailers. From digital marketing to customer engagement, retailers can explore innovative tactics and stay updated on the latest trends to effectively reach and engage their target audience.
These resources can aid retailers in identifying proactive measures to overcome the challenges posed by the forecasted modest growth in the retail sector in the UK in 2023.
