Skip to main contentSkip to navigationSkip to navigation
Boxing day sales in London
Consumer spending over the final three months of 2019 fell by 1% compared with the previous quarter. Photograph: Vickie Flores/EPA
Consumer spending over the final three months of 2019 fell by 1% compared with the previous quarter. Photograph: Vickie Flores/EPA

High street gloom continues as fears grow over UK economy

This article is more than 4 years old

Retail sales fail to rise for record fifth month in a row in December, says ONS

High street sales in Britain slumped in December as consumers reined in their spending over the key Christmas shopping period, adding to the gloom facing embattled retailers across the country and increasing the likelihood of an interest rate cut later this month.

The Office for National Statistics said retail sales failed to rise for a record fifth month in a row in December as household spending in high street shops and online plunged by 0.6% from the previous month.

Sounding the alarm over the health of the economy at the end of last year as Brexit uncertainty weighed on growth, the ONS said sales had not risen on a monthly basis since July, the longest period since records began in 1996.

Consumer spending over the final three months of the year fell by 1% compared with the previous quarter, while sales growth for the year dropped to 0.9%, below all estimates made by City economists in a Reuters poll.

The latest snapshot comes after retailers said 2019 was the worst year for sales in a quarter of a century and follows several dire festive trading updates from major high street chains, including John Lewis and Marks & Spencer.

Ryan Broomfield, a partner and retail specialist at the accountancy firm RSM, said: “Shoppers will have noticed the impact of store vacancies in retail parks and town centres, notably in areas which have lost large department stores and with further closures expected in 2020.”

The retail sales slump fuelled mounting speculation in the City for an immediate interest rate cut when the Bank of England’s monetary policy committee (MPC) meets next on 30 January. The pound slumped on the money markets after the update, sliding against the US dollar and the euro.

Financial markets indicate the chance of a cut in borrowing costs at the next meeting has risen above 50%. The January meeting will be Mark Carney’s last as governor before he stands down in March to be replaced by Andrew Bailey, currently head of the UK financial watchdog, the Financial Conduct Authority.

Analysts said that political uncertainty before last month’s general election, combined with bad weather, kept consumers away from the shops, while the later timing of Black Friday – the US-inspired sales event – had brought forward some sales to November.

Quick Guide

Why are UK high street retailers in trouble?

Show

What’s the problem?

Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.

In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores. 

At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.

What help do retailers need?

Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. Many businesses which deal with complex supply chains also want additional help with the new red tape and import charges imposed after Boris Johnson's Brexit deal saddled them with extra costs.

What is the government doing?

In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.

Photograph: Matthew Horwood/Getty Images Europe
Was this helpful?

According to the ONS, all sectors of the retail trade, except stores selling household goods, and petrol stations, recorded a decline in sales.

Spending on food fell by 1.3% in December, the biggest monthly decline for four years.

The quantity of goods bought in department stores continued a downward trend, with a monthly slide of 1.8%, reflecting difficulties facing well known chains including Debenhams and Beales. Thousands of jobs have been cut in retail in the past year, as weaker consumer spending and rising costs have damaged company profits.

Jake Berry, the high streets minister, said the government was acting to support troubled retailers by cutting business rates for small firms and investing £3.6bn in town centres.

“We absolutely recognise that rapidly changing shopping habits are a challenge for high streets across the country,” he added.

Sign up to the dailyBusinessToday email or follow GuardianBusinesson Twitter at @BusinessDesk

Online sales as a proportion of all retailing stood at 19% in December, up from 18.6% the previous month, as consumers increasingly shift away from spending money on the high street to do their shopping online.

Consumer spending had been helping to support continued growth in the British economy since the EU referendum three years ago, buoyed by record employment levels and rising wage growth. However, wage growth has begun slowing in recent months.

Analysts said it remained to be seen if Boris Johnson’s unexpectedly decisive election victory would help boost consumer confidence, although they warned the December trading figures were concerning for the health of the economy.

There have been signs of an initial lift in confidence, after a survey from the credit card provider Barclaycard showed a marked rise in consumer optimism following last month’s election.

Ed Monk, an associate director for Personal Investing at Fidelity International, said: “2019 was miserable for retailers, topped off by a dismal Christmas trading season. Today’s figures will raise further questions around how robust the UK economy really is going into the year ahead.”

Most viewed

Most viewed