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Shoppers deserted UK high streets during June as the washout weather and continuing Brexit uncertainty helped drive store visits down to a seven-year low for the month.
The “summer slump” took a particularly heavy toll on high streets, with shopping centres also badly affected, according to the British Retail Consortium’s (BRC) monthly footfall tracker for the period from 26 May to 29 June.
The data will fuel fears that Britain’s economy has come to a standstill, with fears of a no-deal Brexit prompting consumers to sit on their hands and put off non-essential purchases.
Footfall across shopping areas fell by 2.9% during the period, up from a 0.9% decline in the same month last year.
That is the lowest June figure recorded since 2012, the second consecutive month where every UK region recorded a decline in footfall.
High streets were worst hit, with visits sliding by 4.5%, compared with a 0.1% rise in June 2018, when the World Cup and sunny weather prompted many people to snap up barbecues, garden items and impulse purchases.
Shopping centres also recorded significantly fewer visits, as footfall fell 2.4% for the month. Retail parks appeared to buck the gloomy trend, however, with 0.1% more visitors than the previous June.
The BRC chief executive, Helen Dickinson, said the figures amounted to a “summer slump”, adding: “Poor footfall this June led to a significant fall in the sales figures for the month … Last year’s World Cup and glorious sunshine set a high bar which 2019’s slow consumer spending and Brexit uncertainty failed to live up to.”
However, June’s decline represents a month-on-month improvement on May’s figures, which recorded footfall down 3.5% on the same month in 2018 – the worst figure recorded since January 2013.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. 2018 saw the disappearance of Toys R Us, Maplin and Poundworld as a result.
In terms of habits, shoppers are switching to buying online. The likes of 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. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, 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. They also want more political certainty as the potential for a no deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs after October 2019. 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.
What is the government doing?
In the October 2018 budget the government announced some relief on business rates for independent shopkeepers. 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.
What is the outlook in 2019?
Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the Far East, have also added to costs and hit profits.
The high street is being rocked by changes in shopping habits as consumers shop online rather than visit local stores. This trend is only likely to accelerate: the internet is expected to account for more than half of UK retail sales in 10 years’ time, up from about a fifth at present, according to a report by the analysts Retail Economics for the law firm Womble Bond Dickinson earlier this month.
Household names such as Monsoon, Debenhams, Mothercare, Carpetright and New Look have resorted to an insolvency process known as a company voluntary arrangement (CVA) to close stores and seek lower rents. Arcadia, owner of Topshop, Miss Selfridge, Evans and Burtons, among others, has also agreed a CVA.
Dickinson said high streets and shopping centres needed to invest in improving their “consumer experience” if they wanted to see footfall numbers rise, but with little money in the pot to spend on such measures, the government must reform the “broken” business rates system and give firms the means to make the necessary improvements.
The latest data showed that the West Midlands region was worst affected, notching up a 6% year-on-year decline in shopper numbers. London took the smallest hit, down 0.6%.
Diane Wehrle, Springboard’s marketing and insights director, said that while the numbers were disappointing, given the “exceptional and ongoing disruptive political and economic period” the UK was facing, coupled with the turmoil in the retail sector, “we might actually expect consumer activity to have taken an even greater hit”.
The BRC revealed last week that retail sales in June fell by their biggest margin since records began in the mid-1990s, prompting it to declare that clarity over Brexit was desperately needed because the continued risk of a no-deal outcome was damaging consumer confidence and forcing retailers to spend hundreds of millions of pounds on measures to minimise the impact.
Meanwhile, the Office for National Statistics reported that UK GDP rose by 0.3% in May from a month earlier, although some economists claimed Britain remained on the cusp of its first quarterly contraction since 2012.
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