Confidence remains low

The British Retail Consortium’s (BRC’s) latest monthly survey finds ‘consumer confidence has fallen further to all-time lows’, prompting discounting from most retailers in order to generate sales.

This discounting led to a 1.5 per cent like-for-like increase in UK retail sales compared to February 2007, with food sales remaining strong and an early Mothering Sunday boosting health and beauty lines. However, clothing and footwear sales fell, with homeware and furniture sales weakening further.

‘The divergence between the best- and worst-performing retail sectors continues to grow,’ observes Helen Dickinson, head of retail at accountant KPMG. ‘Food and drink continued their strong start to 2008, with an even better performance than in January. This sector remains the primary driving force behind the figures, given that it’s such a large part of total retail spending at around 40 per cent of the total market.’ With the figures inflated by maternal purchases, she concludes that ‘caution about the outlook remains the order of the day’.

According to BRC director general Stephen Robertson, ‘the latest official data knocks on the head scare stories that rocketing food prices are driving up inflation. In fact, the government figures show that food played the biggest part in containing inflation. In particular, fruit prices fell, while vegetable prices rose by less than a year ago, more than outweighing any dairy price increases.’

Instead, ‘inflation is actually being driven mainly by household energy bills’ and retailers recognise that household budgets are getting tighter and customers ever more price conscious. ‘Price is becoming even more of a battleground for retailers,’ he adds. ‘These figures show retailers are stepping up their efforts to offer their customers value.’

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