The Confederation of British Industry (CBI) has revealed that the UK retail sector experienced a deepening downturn in December, with the holiday season failing to bring the anticipated boost in sales. Rather than providing actual sales figures, the CBI report focuses on the percentage of retailers reporting higher or lower sales. According to the report, retail sales volumes fell rapidly in December, marking the eighth consecutive month of year-on-year declines.
Further exacerbating the situation, retailers are pessimistic about the sector’s performance in the coming year. The report shows a significant deterioration in the weighted balance of those reporting a decline in sales volumes, from -11% in November to -32% in December. Expectations for January are even more somber, with a projected decline of -41%.
Aside from declining sales volumes, retailers also scaled back their orders with suppliers at the fastest rate since May 2020, further highlighting the challenges faced by the sector. However, the report predicts that this reduction in orders will moderate next month. Additionally, retailers judged their stock levels to be “too high” relative to expected sales in December, though this figure is slightly lower than that of November. It is expected that stock positions will largely remain unchanged in the following month.
The report also draws attention to the decline in internet sales volumes, which fell notably in December and is projected to continue on a downward trajectory in the upcoming month.
Martin Sartorius, CBI Principal Economist, expressed disappointment over the retail sector’s performance during the crucial holiday trading period. Sartorius notes that retailers are bracing themselves for a difficult start to the New Year, with sales expected to decline at an accelerated pace. He attributes the decline in consumer spending to strained household finances and higher interest rates. Sartorius also points to the increase in business rates for many retailers and the rise in the National Living Wage as additional pressures on the sector.
In summary, the CBI report presents a bleak outlook for the UK retail sector in December and the foreseeable future. The continuous decline in sales volumes, reduced orders, and high stock levels pose significant challenges for retailers. Strained finances, higher interest rates, and rising costs are to blame for the downturn. Retailers must prepare for a challenging period ahead and devise strategies to overcome these obstacles.
Useful links:
– The Guardian: UK retail sales plunge in bleakest December in six years
– Retail Gazette: Retailers face challenging start to 2022
