The British Retail Consortium has said the first half of the year is likely to be a challenge for retailers and consumers, with retail sales set to grow by 1% to 2.3%.
Sales are expected to pick up in the second half of the year as inflation slows and consumer confidence improves, with growth of 3.6 to 4.7%. Non-food sales are expected to move from decline to growth.
At a time when many cost pressures were already increasing throughout the supply chain last year, the war in Ukraine pushed inflation into an upwards spiral – with energy and food prices increasing by over 10% year-on-year during the second half of 2022.
During the period as inflation peaked, and the cost-of-living crisis unfolded, total retail sales growth was 2.3%. However, once inflation – rising to over 11% across the economy – is accounted for, these figures represent falls in sales volumes for both food and non-food.
Kris Hamer, director of insight at the BRC, commented: “The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5 billion as the government’s Energy Bill Relief Scheme comes to an end in March, putting ongoing upwards pressure on prices.
“There is cause for optimism in the second half of 2023, when we expect inflation to ease and improving consumer confidence to result in an improvement to sales growth and corresponding volumes.
“Despite facing huge cost pressures, retailers will continue to do all they can to keep prices affordable for their customers. The market remains very competitive, and every retailer will be striving to attract and retain customers as people continue to be discerning in their purchasing decisions.”
