Retail growth “unlikely to improve” in 2016

British consumers are looking beyond retail to spend their disposable income, warns research from the KPMG and Ipsos Retail Think Tank, which states that retail growth is “unlikely to improve” in 2016.

The research warns that the retail sector sales growth is set to drop back to around 1.7 percent in 2016 from about 1.8 percent in 2015, as consumers look to spend their money on leisure, culture and entertainment, rather than the retail sector.

“Consumers are looking beyond retail for goods and services to spend their money on,” said think tank panel member Maureen Hinon, a retail analyst at Conlumino. “This is making it much harder for an oversubscribed retail sector. Leisure, culture, entertainment have shown much stronger growth than retail over the past five years and this trend is being exacerbated by an ageing population.”

The think tank believes homeowners will put spare cash towards paying off the mortgage as well as home improvements, and experimental activities, rather than spending more on clothing or food.

The report adds the retail sector will receive further complications this year with the implementation of the National Living Wage in April, as well as rises in business rates. David McCorquodale, UK head of retail at KPMG said this will result in “a significant overnight increase to the cost base but much more complex than a simple rise in hourly rate as it has a knock-on impact on, inter alia, pay differentials, staff discounts, tea breaks and pensions. It is further complicated with the wage set to increase for each of the next four years.”