UK retail sector shows signs of stabilisation amid challenges: CBI

Retail sales fell by a weighted balance of minus 7 per cent in February, a significant improvement from the minus 50 per cent drop observed in January. This marks the slowest rate of year-on-year decline within the ongoing ten-month period of falling sales. However, retailers anticipate a slight acceleration in the pace of sales decline next month, with expectations set at minus 15 per cent.

A silver lining emerged as February sales aligned closely with seasonal norms for the first time in five months, indicating a potential return to more predictable consumer spending patterns. Despite this, retailers expect sales in March to dip below seasonal averages, as per the survey.

In a notable shift, internet retail sales experienced growth in February for the first time in eight months, rising by 4 per cent from a stark minus 54 per cent in January. This resurgence contrasts with the broader trend of declining physical sales, with digital sales projected to increase significantly next month (up 37 per cent).

Selling price inflation, a key concern for both retailers and consumers, showed signs of easing. February's inflation rate was the lowest recorded since May 2021, at 54 per cent, down from 73 per cent in November, though it still remains above the long-term average. Retailers expect similar inflation levels in the coming month.

The sector continues to face challenges with employment, as the number of jobs fell for the sixth consecutive quarter, and retailers plan further reductions in the year ahead. This ongoing decrease in employment reflects broader economic pressures facing the industry.

Furthermore, investment intentions among retailers remained negative for the eighth consecutive quarter, although plans for capital expenditure were less pessimistic than in recent surveys. This cautious optimism suggests that while the retail sector is not yet in recovery, there are signs of adaptation and resilience amid ongoing economic challenges.

Martin Sartorius, CBI principal economist, said: “The slump in retail activity eased in February following an exceedingly dreary start to the year. Nevertheless, with sales expected to continue falling next month, retailers are still planning to reduce headcount and investment going forward.

Many retailers will expect to see further pressure on their margins due to the upcoming hikes in business rates and the national living wage. In the spring budget, the chancellor should aim to cap the increase in the England business rates multiplier and work with the devolved administrations to do the same, which would help retailers return to a path to growth.”

Fibre2Fashion News Desk (DP)