Cost-of-living crisis: Outlook for retail sector 'increasingly bleak' as consumers rein in spending

The outlook for Britain’s retail sector is looking “increasingly bleak”, experts have warned, after a fall in sales as cash-strapped consumers rein in spending.

Official figures from the Office for National Statistics (ONS) revealed a drop in retail sales last month after takings tumbled 1.6 per cent across food stores.

The ONS also revised down sales growth in April, from the 1.4 per cent previous estimation to an increase of just 0.4 per cent.

It found that sales in supermarkets dropped 1.5 per cent over May, with a 2.2 per cent drop in specialist shops such as butchers and bakers.

But the biggest decline in spending was seen on alcohol and tobacco, with sales down 4 per cent.

The data likewise showed a pull back in spending on household goods and in department stores, with sales dropping 2.3 per cent and 1.1 per cent respectively, as shoppers worry about affordability. It comes amid mounting signs the cost-of-living crisis is beginning to take its toll on the economy.

Official figures on Wednesday showed inflation had reached a fresh 40-year high of 9.1 per cent, stoking recession fears amid forecasts that inflation could surge well into double-digit territory.

Heather Bovill, deputy director for surveys and economic indicators at the ONS, said: “Feedback from supermarkets suggested customers were spending less on their food shop because of the rising cost of living.

Shoppers are becoming increasingly savvy about what they put in their baskets. Picture: Greg Macvean

“More workers returning to the office may have contributed to increased fuel sales this month while shoppers buying outfits for summer holidays helped boost clothing sales.

“These rises were offset by falls for household goods and department stores, with retailers in these areas reporting consumer reluctance to spend due to affordability worries and higher prices.”

Lisa Hooker, industry leader for consumer markets at PwC, said: “Despite some recovery in high street footfall, the exuberance in the run up to the Platinum Jubilee celebrations and the sunny weather, all of these positives were unable to outweigh the wider drag of the cost-of-living crisis on retail sales.

“Falling confidence and accelerating inflation in non-discretionary spending areas like utilities and food will further limit consumers’ ability to spend as the year progresses. Without further government assistance, the rest of 2022 is looking increasingly bleak for the retail sector.”

Kevin Brown, savings specialist at Scottish Friendly, noted: “Rising living costs are now affecting the daily spending habits of large swathes of people across the country, not just those who are on lower wages.

“Higher prices mean that millions of families are buying less food. As many as 44 per cent of adults, surveyed by the ONS, say they have bought less when shopping in the last two weeks.”

Earlier this month it emerged that Scottish consumers were cutting back on discretionary spending and switching to cheaper brands.

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales north of the Border increased by 1.6 per cent in May, compared with a year earlier. However, that headline figure was largely a reflection of rising prices, industry leaders noted, and in real terms there was a year-on-year fall of 1.1 per cent.