UK retail sales experienced a significant slowdown in June, with overall growth dipping to 1.9% year-on-year, a notable decrease from the 3.7% recorded in May. This deceleration, reported by the British Retail Consortium (BRC), aligns with the average growth rate observed throughout the current year. The primary driver behind this slump was a considerable drop in footfall to physical stores, where sales declined by 1.1%, as Britons opted to avoid the high street during a period of intense heat.
Despite the challenges faced by brick-and-mortar establishments, online shopping provided a crucial counterbalance. Non-food online sales surged by more than 5%, representing the largest proportion of total retail sales recorded this year. This shift indicates a strong consumer preference for at-home shopping, particularly as the nation grappled with stifling temperatures. Popular purchases included electric fans, air conditioning units, and paddling pools, as households invested in keeping cool.
Linda Ellet, UK head of consumer at KPMG, highlighted that the high temperatures coincided with the men's football World Cup, creating a dual boost for certain sectors. She noted a strong demand for home appliances such as fans and air conditioning, with some retailers struggling to replenish stock quickly enough. The World Cup also contributed to increased sales in home electronics, food, and drink, as consumers prepared to watch matches from the comfort of their homes.
However, the impact on physical retailers was significant, with many struggling to manage operations amidst the heat. Stuart Machin, CEO of M&S, recently informed shareholders that the company is investing in new refrigeration technology capable of withstanding prolonged high temperatures, acknowledging the difficulties faced during a nine-day period of extreme heat. This highlights the operational pressures businesses encountered beyond just declining sales.
Looking ahead, retailers are intensifying calls for governmental reform of business rates. Helen Dickinson, Chief Executive of the BRC, stated that these pressures are compounded by rising employment taxes and ongoing global uncertainty, which collectively hinder retailers' ability to invest, create jobs, and maintain competitive pricing. The trade body has urged incoming Prime Minister Andy Burnham to adopt a more integrated approach to taxing the high street. Mr. Burnham, the MP for Makerfield, has previously pledged to reduce business rates for retail and hospitality firms, proposing to fund this by increasing levies on out-of-town warehouses. The newly formed Real Rates Reform Alliance, comprising various trade bodies, continues to advocate for a fairer business rates system, arguing that current high tax bills force businesses to increase consumer costs, cut investment, and reduce staff numbers.