More signs of Brexit slowdown as retail sales fall
Consumer spending helped sustain the UK economy right after the Brexit vote. Not any more.
Figures released today for May show Britons are buying less and spending less. The report by the Office for National Statistics (ONS) show retail sales fell by 1.2% in volume and by 1.1% in value compared to April. Non-food stores were particularly hit with sales of household goods showing the biggest decline.
When compared to last year, the report showed that whilst the amount spent increased by 4.1%, the quantity bought only increased by 0.9%, which is the weakest annual growth rate in four years. The ONS said “increases in average store prices may explain this slowdown”. With news on Tuesday that inflation had jumped to a higher than expected 2.9% in May, it’s difficult to see how inflation isn’t behind the slowdown.
This week also saw the release of the latest employment report, which showed that real pay (pay adjusted for inflation) fell by 0.6%. The ONS said this is the biggest decline in real pay since August 2014. The cost of living is getting more expensive with Britons having less money in their pockets and therefore less money to spend. It’s a triple whammy of signs that the UK economy is slowing down and it’s fair to say that it’s a direct result of a weakened pound since the referendum vote to leave the EU.
This is further evidence that the surge in consumer spending, which sustained UK economic growth since the EU referendum, has come to an end.
Andrew Sentance, senior economic adviser for PwC
After the vote, the UK economy showed resilience with consumers continuing to spend. However as reported in the Guardian’s business live blog, PwC senior economic adviser Andrew Sentance said “the surge in consumer spending, which sustained UK economic growth since the EU referendum, has come to an end”. Sentance added “this subdued growth of consumer spending” is likely to continue while inflation remains high and could go even higher.
Last year, former head of Sainsbury’s Justin King said the effects of Brexit on consumer confidence could take a while. As we reported, he referred to the 2008-9 financial crisis saying that it wasn’t until 2010 when consumers changed the way they shopped.
It’s now a year since the referendum vote. Today’s retail sales report is further evidence that consumers have now changed the way they shop and consumer confidence has taken a hit.