Recent data reveals a lackluster Christmas season for retailers, with families tightening their belts in response to escalating living costs. The British Retail Consortium (BRC) reported a meager 1.7% growth in sales in December compared to the previous year, despite inflation likely exceeding that rate. This suggests a reduction in the volume of purchases compared to the previous year.
Helen Dickinson, Chief Executive of BRC, expressed disappointment, stating that the festive period failed to compensate for a challenging year marked by sluggish retail sales growth. Weak consumer confidence remained a significant factor hindering spending.
Notably, typical gift items like clothing, jewelry, and gadgets reported lackluster sales, with Barclays data indicating a 2% decline in clothing spend in December. Overall retail spend increased by only 0.6%. Paul Martin, UK Head of Retail at KPMG, anticipates downward pressures on demand in the opening months of the new year as cautious consumers batten down the hatches.
Despite aggressive retail discounts, consumer spending remains restrained. Helen Dickinson warned of additional challenges in 2024, citing disruptions to shipments through the Red Sea due to conflict in the Middle East.
The impact extends beyond retail, as restaurants experience a downturn in total card spending, with an 8.8% decline, and transactions dropping by 13.1%, according to Barclays consumer card data. Simon Stenning, founder of The Future of Foodservice, attributes this to reduced disposable incomes affecting households' frequency of dining out.
UK Hospitality warns of a notable surge in restaurant closures this January, the highest in at least 25 years. High-profile closures, including establishments owned by former MasterChef finalist Tony Rodd and Sunday Brunch host Simon Rimmer, highlight the challenges faced by the industry in the current economic climate.
In response to persistent challenges in the hospitality sector, Kate Nicholls, Chief Executive of UKHospitality, emphasizes the critical need for government support. Despite a decline in inflation, the escalating costs of conducting business pose a significant threat to the industry.
Ms. Nicholls advocates for specific measures to alleviate the financial strain on businesses. Her recommendations include implementing a cap on the increase in business rates for larger sites, reducing Value Added Tax (VAT), and lowering employer National Insurance contributions to counterbalance the impact of wage increases.
As the sector grapples with ongoing economic pressures, Ms. Nicholls' call for government intervention underscores the urgency of addressing financial hurdles faced by businesses within the hospitality industry.
In conclusion, Kate Nicholls, Chief Executive of UKHospitality, has sounded a resounding call for government support as the hospitality sector grapples with rising business costs. Despite a decrease in inflation, the industry continues to face financial challenges, prompting Ms. Nicholls to advocate for specific measures. The suggested interventions include capping increases in business rates for larger establishments, reducing VAT, and lowering employer National Insurance contributions to counterbalance the impact of rising wages. The urgency of these calls emphasizes the crucial role of government support in ensuring the sustainability and resilience of the hospitality sector amidst evolving economic conditions.