Warm weather and heavy discounting give UK retail a post-Brexit respite

Figures published by the British Retail Consortium (BRC) on Tuesday showed how sales at both online and brick and mortar stores in the UK rose the most for six months in the four weeks to 30 July.

The positive figures somehow help British retailers to shrug off post-Brexit gloom. The latest statistics produced by the BRC hint that shoppers shrugged off the EU referendum result and continued spending in the weeks that followed.

But the joy is a short lived one as the Bank of England has predicted that growth will slow sharply over coming months, despite cutting interest rates to a record low. In agreement are many economists who think that it is too early for retailers to think the worst of Brexit´s aftermaths are already passed.

Positive sales development in July gives British retailers a silver line after Brexit

Over the three months to July, online sales of non-food products in the UK grew 11.1 percent year-on-year. Over the same period, store sales fell, posting growth of -1.0 percent on a total basis and -1.3 percent on a like-for-like basis – The pace of decline in store sales has slowed this month, but growth remains firmly in negative territory, highlights ‘Internet Retailing’.

Helen Dickinson OBE, Chief Executive, British Retail Consortium (BRC) [IRDX VBRC] explains: “Online (non-food) sales echoed the performance of total sales this month, with growth rising back to the 12 month average. The brief drop-off in online sales activity in the few days following the referendum turned out to be a blip as consumers, who had turned their attentions to browsing for details about the EU, quickly returned to spending online.”

Dickinson further adds that “As with in-store sales, there was widespread promotional activity in July. That is usual for this time of year, although a number of retailers undertook longer and broader promotions as a result of the substantial accumulated stock resulting from a sluggish first half of 2016. We’ll have to watch and wait to see if the success of promotions spills over on to full price sales.”

On a related note, David McCorquodale, Head of Retail, KPMG [IRDX VKPM] adds: “E-tills were ringing this July with overall non-food online sales up 11.2 per cent in the month. Women’s fashion and accessories performed positively compared to the slump in June as the July heatwave coupled with seasonal sales spurred summery purchases.”

July sales were up by 1.1 percent on a year earlier in like-for-like terms, according to the BRC’s monthly sales monitor, commissioned to KPMG. This marked a recovery from the 0.5 percent fall witnessed in June and was the strongest performance since January. In total terms, not adjusting for the effect of new store openings, sales rose by 1.9 percent in July, also the strongest growth since January.

Looking ahead, the BRC said the Brexit vote would pose a challenge for retailers in the months ahead: “This month’s solid sales figures may come as a shock to some, given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” said Dickinson. “However, little has materially changed for most UK households [since] 23 June, so it is not surprising to us that sales are simply responding to their normal underlying drivers,” she conclude.

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