Hotels, pubs and restaurants ‘feeling impact of consumer caution over Brexit’

Shoppers continued to show a reluctance to spend in February amid Brexit uncertainty as retail sales showed more sluggish growth than a year earlier.

Total retail sales increased by 0.5% year on year in February – showing lower growth than a 1.6% annual increase seen in February 2018, the BRC (British Retail Consortium)-KMPG retail sales monitor said.

The report was released as a separate study from Barclaycard indicated that pubs and restaurants, which tend to perform relatively strongly, are not immune from the impact of shoppers cutting back.

Barclaycard’s research also suggests a significant number of consumers are stockpiling essential food items in case of future shortages.

The BRC-KPMG report showed that, on a like-for-like basis, UK retail sales decreased by 0.1% from February 2018.

Paul Martin, UK head of retail at KPMG, said shoppers are “focusing on the essentials”, with non-food retail categories under more pressure than the grocery category.

Over the three months to February, food sales increased 1.3% on a like-for-like basis. The same period saw non-food retail sales decrease by 0.6% on a like-for-like basis.

Mr Martin said: “Across all categories there was sluggish growth, and the milder weather appears to have shifted the focus away from indoors, with furniture sales declining – and not even Valentine’s Day could boost sales in the stationery category.

“However, the full impact of the recent unseasonably warm weather is yet to be seen, especially for the clothing categories, and online sales growth remained steady.”

Helen Dickinson, chief executive of the BRC, said: “Uncertainty surrounding the UK’s imminent exit from the European Union has hit consumer spending.

“While real incomes have started to rise over the past year, shoppers have been reluctant to spend this February, holding back growth.

“This slowdown was not limited to physical stores, with growth in online non-food sales well below the 12-month average.

“With consumers increasingly aware of the risk of a no-deal Brexit, it is likely that uncertainty has driven this cautious approach to retail spending.”

Meanwhile, Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, said there was “unusually low” growth in spending in pubs and restaurants in February, which had increases of 7.4% and 3.9% respectively year on year.

Hotel spending saw spending shrink by 3.8% year on year.

Both these categories have a history of showing strong growth, it said.

Barclaycard said essential spending increased by 2.3% year on year in February, propped up by relatively modest growth in supermarket spending.

Non-essential spending, meanwhile, saw growth of just 0.8% year on year – as spending on clothing contracted by 5.2% annually, while department stores saw a year-on-year decline of 5.5%.

A consumer survey from Barclaycard among more than 2,000 people found nearly a third (32%) say they are cutting back on non-essential spending – such as eating out or buying new clothes – or shopping more often at discount stores to make their money go further.

Nearly a fifth (18%) have started stockpiling essential food items in case of shortages in the near future.

Esme Harwood, director at Barclaycard, said uncertainty over Brexit appears to be driving a shift in behaviour, with some people even stockpiling everyday items, adding: “Discretionary expenditure has seen a considerable decline – spending at retailers continues to decrease, and even hotels, pubs and restaurants are feeling the impact of cutbacks.”