UK retailers are still struggling to generate sales growth, as revealed by the latest CBI Distributive Trades Survey. The survey provides insights into the direction of sales and the sentiment within the retail community. The results for November show that retail sales volumes have fallen year-on-year for the seventh consecutive month. Despite a slight increase in sentiment, retailers anticipate further declines in sales in December.
The survey also highlights potential job losses in the retail sector, with a reduction in headcount from the previous year. Furthermore, investment in the sector is expected to decline in the coming year. Although inflation is expected to ease, price pressures in the retail sector are anticipated to remain significant.
Taking a closer look at the figures, the survey reveals that retail sales volumes have decreased at a slower pace in November compared to the previous month. The “weighted balance” dropped to -11% from -36% in October. This figure represents the proportion of retailers that experienced a decline in sales compared to those that did not. Based on this metric, retailers expect a further decline in volumes next month, but at a slower rate of -6%.
Sales performance in November was considered disappointing for the time of year, with a figure of -16% compared to -10% in October. Retailers also expect sales volumes in December to fall short of seasonal norms, with a projection of -15%. However, there is some positive news as the number of companies expecting a slight improvement in their business situation over the next three months has risen to +4%, a significant improvement compared to -14% in August.
Despite the improved outlook, retailers anticipate reducing investment in the next year, although to a lesser extent than previously forecast (-11% compared to -25% in August). Inflation continues to be a concern, with retail selling prices rising rapidly in November by 73%, well above the long-run average of 41%. Retailers predict a similar rate of growth in selling prices next month, at +72%.
Inventory levels are still seen as too high, despite a slight decrease in November. Stock volumes are expected to remain relatively high in relation to projected sales next month. Additionally, online sales volumes continue to decline, but at a slower rate than the previous month. A similar pace of decline is anticipated for online sales in the coming month.
Martin Sartorius, CBI Principal Economist, expressed concerns regarding the upcoming increase in business rates, which were not addressed in the Chancellor’s Autumn Statement. Sartorius highlighted the burden placed on retailers, who are facing rising costs at a time when their financial capacity is limited.
Overall, the CBI sales survey indicates that UK retailers are still facing challenges in generating sales growth, with declines in sales volumes, reduced investment, and inflationary pressures. While there are signs of slight improvement in sentiment, the retail sector continues to struggle amidst a challenging economic environment.
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