High Street Sales And Consumer Confidence Plummet After Brexit Vote

The UK’s decision to leave the EU in last month’s referendum vote appears to have had an immediate impact on high street sales and consumer confidence.

BDO’s monthly High Street Sales Tracker (HSST) recorded a 3.6% fall in overall year-on-year sales for June, making it the worst June in over 10 years.

Sales of lifestyle goods for the month were down 0.2% compared to June 2015 and fashion dropped to 4.9% – the sector’s second lowest monthly figure so far this year. Sales of homewares slipped 6% year-on-year and non-store sales rose just 15.8%.

A strong start to June saw overall sales grow 3.8% year-on-year in the first week, but BDO said the ‘Brexit effect’ hit retailers with increasing severity as the month wore on. Sales reversed to a 3.1% drop in the second week and by the final week of June – two days after the ‘leave’ campaign declared victory – overall year-on-year sales had plummeted 8.1%.

Sophie Michael, Head of Retail and Wholesale at BDO LLP, predicted a challenging period
ahead for the high street. “Many retailers may have hedged against the falling pound for the short term, but if sterling stays at these levels, the cost of importing goods and further erosion to margin may need to be passed onto the consumer”.

She added: “It is even more important now for retailers to focus on their product offering and service. While reports suggest that average income has reached a historic high, the challenge for retailers is to convince consumers to spend their surplus income with them, amid the temptation of a post–Brexit spending paralysis.”

Meanwhile, separate data from GfK shows that consumer confidence saw its sharpest drop in 21 years after referendum result. In a one-off special GfK Consumer Confidence Barometer (CCB) to measure post-referendum sentiment (from 30 June to 5 July), the index fell by 8 points to -9, a drop not since seen December 1994.

Splitting the core Index result by how people said they voted in the referendum, Remainers were at -13, versus Leavers who were more optimistic at -5.

The results revealed consumer concerns about the economic outlook. 60% expect the general economic situation to worsen in the next 12 months, up from 46% in June. Only 20% of consumers expect it to improve, down from 27% in June. The proportion of people who believe prices will increase rapidly in the next 12 months has jumped 20 percentage points from 13% to 33%.

Joe Staton, Head of Market Dynamics at GfK, commented: “In these extraordinary times this one-off CCB Brexit Special gauges the temperature of consumer confidence right now. During this period of uncertainty, we’ve seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.”

Staton added: “Our analysis suggests that in the immediate aftermath of the referendum, sectors like travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable to consumers cutting back their discretionary spending.

“As we’ve learnt from previous periods of uncertainty, consumers turn to well-known brands they love and trust as a guarantee of quality and value for money. Now is the time for companies to understand and respond to consumer concerns by anticipating and meeting their needs.”

NAM Implications:
  • In other words, back to the basics of trust, value for money and the contents of the tin always exceeding the expectation created by the label
  • …with consumers gradually coming back to the market, in more savvy-mode
  • And any growth at the expense of the competition…