UK retail sales suffer biggest fall for 16 years

The UK retail sales figures for March 2011 fell by 3.5% on a like-for-like basis compare to March 2010, according to figures issued this morning by the Retail Consortium and KPMG.

It is the worst drop recorded since the Retail Sales Monitor was launched in 1995.

UK retail sales values were down 1.9% on a total basis from March 2010, when sales had risen 6.6%, boosted by Good Friday and Easter Saturday falling in the March trading period. On a like-for-like basis, sales were 3.5% lower, against a 4.4% increase in March 2010.

Like-for-like food sales fell well below their year-earlier level and non-food sales showed an even larger decline. Consumers' underlying uncertainty about jobs and incomes, as well as the later Easter, hit both. Big-ticket home and furniture purchases suffered most and were often promotion-led.

Non-food non-store (internet, mail-order and phone) sales growth fell further in March. Sales were 7.5% higher than a year ago, the smallest increase since the series began in October 2008 and much weaker than the 10.4% in February.

Stephen Robertson, director general, British Retail Consortium, said: "This is the worst drop in total sales since we first collected these figures in 1995. Non-food retailers were particularly hard-hit. This is strong evidence of the pressure customers and traders are under. This year's later Easter is a factor but this fall goes way beyond anything that can be explained by that alone.

"Uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for 30 years. Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to. These pressures aren't going away and the arrival of higher National Insurance is likely to compound them in the immediate future.

"The next interest rate decision is a difficult balancing act for the Bank of England but, for now, supporting our weak economy must be the priority. Inflation is coming mainly from temporary and external price shocks - VAT, world commodity prices and the weak pound - not wage or consumer-driven increases. Increasing interest rates would do more harm than good."

Helen Dickinson, head of retail, KPMG, said:"The food sector suffered in the month due to Easter purchasing falling into March last year, thus impacting the overall results. However, beyond this the trend continues in a marked downward direction: non-food continues to struggle, with big-ticket and home-related sectors again being the hardest hit. We have seen an emergence of new, lower spending patterns since the middle of January, which are currently continuing to trend downwards.

Many retailers will not be able to sustain this ongoing weakness in demand beyond the short term and are hoping for some good news around the extended bank holiday period and a feel-good factor driven by the royal wedding. However, as disposable income continues to fall, without reducing saving or increasing borrowing – which would oppose current trends – this will not be possible."

Source : The Retail Bulletin