Retail sector faces challenging year as Xmas sales tumble

Official figures reveal weakest showing for high street in seven years last month

The UK high street suffered its worst December sales performance in seven years last month, official figures have revealed, and the outlook for consumer spending is likely to remain fragile.

According to the Office for National Statistics (ONS), retail sales fell 1.5 per cent month-on-month during December – a sharper decline than most economists had forecast.

As well as being the worst December sales performance since 2010, the result also marks the biggest month-onmonth fall since June 2016, when the UK voted to quit the European Union.

Consumer confidence has taken a hit since the referendum vote as Brexit-fuelled inflation eats into spending power and shoppers are further squeezed by muted wage growth and higher utility bills.

Black Friday, which falls in November, has also seen many people bring forward big-ticket purchases typically made in the run-up to Christmas, denting the December sales figures.

ONS senior statistician Rhian Murphy said: “Consumers continue to move Christmas purchases earlier, with higher spending in November and lower spending in December than seen in previous years.

“However, the longer-term picture is one of slowing growth, with increased prices squeezing people’s spending.”

Annual growth fell to 1.9 per cent for the whole of 2017, according to yesterday’s ONS data, well below expectations andtheweakestrateofgrowth since 2013.

Howard Archer, chief economic adviser to the EY Item Club, said last month had capped a “disappointing” fourth quarter for retailers as squeezed consumers reined in their spending.

“While a drop in December was always likely after sales had been lifted in November by Black Friday promotions, the decline exceeded all expectations,” Archer noted. “This confirmed that Black Friday deals had brought forward sales into November rather than lifting them overall.”

He added: “The squeeze on consumers remains appreciable at the start of 2018, but it should progressively ease as the year progresses due to inflation falling back significantly and pay gradually picking up.

“However, employment growth is likely to be modest at best in 2018, while consumerconfidencemaywellremain fragile amid significant economic, political and Brexit uncertainties.”

Euan Murray, relationship director with Barclays Corporate Banking Scotland, said: “While still not perfect, looking at results across the wider Christmas season is a better approach, and although three-month growth is softening, the fact that we’re still in positive territory should give some comfort to retailers continuing to battle difficult conditions.”

Storechainsincludingmothercare and Debenhams have issued profit warnings in January after festive trading fell short of expectations.

sreid@scotsman.com