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Retailers urge business rates rethink as high street spending slides Rethink rates now or face retail disaster, shops tell chancellor
(about 1 hour later)
Britain’s hard-pressed retailers have urged Philip Hammond to rethink government plans for revamping business rates amid signs that rising inflation has led to the weakest high street spending in more than five years.Britain’s hard-pressed retailers have urged Philip Hammond to rethink government plans for revamping business rates amid signs that rising inflation has led to the weakest high street spending in more than five years.
A report from the British Retail Consortium and KPMG found that the spurt in consumer spending seen in the run-up to Christmas had come to an abrupt halt, with the result that non-food sales are falling for the first time since the economy was flirting with a double-dip recession in November 2011.A report from the British Retail Consortium and KPMG found that the spurt in consumer spending seen in the run-up to Christmas had come to an abrupt halt, with the result that non-food sales are falling for the first time since the economy was flirting with a double-dip recession in November 2011.
Further evidence that consumers are becoming more cautious was provided by the the Society of Motor Manufacturers and Traders, which released figures on Monday showing a drop of more than 4% in private car sales last month.Further evidence that consumers are becoming more cautious was provided by the the Society of Motor Manufacturers and Traders, which released figures on Monday showing a drop of more than 4% in private car sales last month.
Some City analysts believe households brought forward purchases of big-ticket items in 2016 because they were fearful that the fall in the value of the pound since last June’s Brexit vote would mean having to pay more for the same goods later. The annual inflation rate as measured by the consumer prices index doubled to 1.8% between October and January.Some City analysts believe households brought forward purchases of big-ticket items in 2016 because they were fearful that the fall in the value of the pound since last June’s Brexit vote would mean having to pay more for the same goods later. The annual inflation rate as measured by the consumer prices index doubled to 1.8% between October and January.
The BRC/KPMG report found that non-food sales were 0.2% lower in the three months to February than in the same period a year earlier and 0.4% lower once allowance had been made for the expansion of retailers’ floorspace over the past year.The BRC/KPMG report found that non-food sales were 0.2% lower in the three months to February than in the same period a year earlier and 0.4% lower once allowance had been made for the expansion of retailers’ floorspace over the past year.
Supermarkets fared better, with food sales up by 2% in the three months to February despite the impact of the decline in sterling on the cost of imported produce.Supermarkets fared better, with food sales up by 2% in the three months to February despite the impact of the decline in sterling on the cost of imported produce.
Helen Dickinson, the BRC chief executive, said there had been some distortion caused by the later timing of Mothering Sunday this year, which meant that some categories of spending – such as women’s accessories and health and beauty – failed to benefit from the build-up of gift purchases as they did last year.Helen Dickinson, the BRC chief executive, said there had been some distortion caused by the later timing of Mothering Sunday this year, which meant that some categories of spending – such as women’s accessories and health and beauty – failed to benefit from the build-up of gift purchases as they did last year.
“But looking beyond this distortion, the persistent weak sales performance of several non-food categories points to an undeniable trend of cautious spending on non-essential items,” she said.“But looking beyond this distortion, the persistent weak sales performance of several non-food categories points to an undeniable trend of cautious spending on non-essential items,” she said.
“Tougher times are expected ahead. The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival. Looking to the budget this week, we hope to see a commitment from government to lay a path to a truly sustainable business rates system that will give retailers the flexibility needed to invest and support their local communities.”“Tougher times are expected ahead. The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival. Looking to the budget this week, we hope to see a commitment from government to lay a path to a truly sustainable business rates system that will give retailers the flexibility needed to invest and support their local communities.”
Online spending held up better than spending in stores, although the pace of growth has eased to 8% from the double-digit increases seen in previous years.Online spending held up better than spending in stores, although the pace of growth has eased to 8% from the double-digit increases seen in previous years.
Paul Martin, the UK head of retail at KPMG, said: “Retailers will be paying close attention to the upcoming spring budget in the hope of seeing some measures to ease the pressure being placed on margins. For some bricks and mortar retailers, a hike in business rates may well be the straw that breaks the camel’s back.”Paul Martin, the UK head of retail at KPMG, said: “Retailers will be paying close attention to the upcoming spring budget in the hope of seeing some measures to ease the pressure being placed on margins. For some bricks and mortar retailers, a hike in business rates may well be the straw that breaks the camel’s back.”
The SMMT said new car registrations were broady stable in February, with demand down just 0.3% to 83,115 vehicles sold. Rising fleet sales, up 3.3% on a year earlier, masked a 4.4% decline in sales to private buyers.The SMMT said new car registrations were broady stable in February, with demand down just 0.3% to 83,115 vehicles sold. Rising fleet sales, up 3.3% on a year earlier, masked a 4.4% decline in sales to private buyers.
February’s dip followed a stronger performance in January; for the first two months of 2017, total and private sales were 1.8% up on the same months of 2016.February’s dip followed a stronger performance in January; for the first two months of 2017, total and private sales were 1.8% up on the same months of 2016.
Mike Hawes, the SMMT chief executive, said: “February is traditionally one of the quietest months of the year and a steady performance was expected following another year of record growth in 2016. We expect to see the market bounce back in March as buyers take advantage of the new 2017 plate, as well as the last chance to buy a car eligible for current lower VED [vehicle excise duty] rates before they change on 1 April.”Mike Hawes, the SMMT chief executive, said: “February is traditionally one of the quietest months of the year and a steady performance was expected following another year of record growth in 2016. We expect to see the market bounce back in March as buyers take advantage of the new 2017 plate, as well as the last chance to buy a car eligible for current lower VED [vehicle excise duty] rates before they change on 1 April.”
Howard Archer, the chief UK economist at IHS Global Insight, said: “Consumers are now seeing their purchasing power increasingly diluted and this squeeze looks certain to intensify over the coming months as inflation rises further and earnings growth is muted. Furthermore, a likely weakening economy and more uncertain outlook may well make businesses more circumspect in their car purchases – perhaps taking longer to replace fleets.Howard Archer, the chief UK economist at IHS Global Insight, said: “Consumers are now seeing their purchasing power increasingly diluted and this squeeze looks certain to intensify over the coming months as inflation rises further and earnings growth is muted. Furthermore, a likely weakening economy and more uncertain outlook may well make businesses more circumspect in their car purchases – perhaps taking longer to replace fleets.
“Meanwhile, the sharp weakening of the pound makes it more difficult for car dealers to offer attractive deals on imported cars – with the result that some car manufacturers have raised prices and more increases seem inevitable during 2017.”“Meanwhile, the sharp weakening of the pound makes it more difficult for car dealers to offer attractive deals on imported cars – with the result that some car manufacturers have raised prices and more increases seem inevitable during 2017.”