Retail on the high street has been facing a slew of problems, from changing business models to political turmoil, and its latest problem may well be a growing reluctance among shoppers to spend their hard-earned cash.
A new report from Barclaycard has found that consumer spending in the U.K. has slowed to its lowest mark in nearly three years, growing only 1.8 percent in December, which the credit card and payment services provider says is negative growth when you factor in the 2.3 percent inflation seen over the same period.
“Growth in consumer spending dropped to its lowest level since 2016 and represents a decline in real terms,” Esme Harwood, director at Barclaycard, said. “Many Brits were more modest in their approach to Christmas spending compared to 2017, cutting back on the essentials to balance the costs of the festive season.”
The biggest concern for fashion retailers on high street, however, is that clothing spending saw its third consecutive month of negative growth in December, according to the report. Spending fell 3 percent over the month with department store expenditure declining by 6.3 percent simultaneously.
Certain apparel sectors did better than others in December but none saw positive growth. Family clothing fell 3.5 percent, just above the 3.3 percent decline in women’s clothing and below the 4 percent decline in men’s apparel. Shoe shops fared the best among apparel sectors, only falling 1.3 percent during the period. However, department stores like Debenhams and Marks and Spencer faced tough conditions and the sector fell 6 percent, overall.
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The hardest hit retailers were in the discount stores sector, likely a result of lowered essential spending. Discount stores sales fell 16.3 percent over the same period last year. Meanwhile, spending at pubs was up 12.9 percent just in time for the holiday season.
Even when they were making purchases, the average transaction value for shoppers was down 5.3 percent, although clothing only saw a 0.2 percent drop.
Barclaycard says tightening consumer spending is due to shoppers cutting back on new clothes during the expensive holiday season, focusing more on balancing their budgets for whatever may come ahead.
What may come ahead may very well be a recession, as half of the U.K. citizens surveyed by Barclaycard for the report admitted that they are concerned that the economy may decline over the next year. That number was up 7 percentage points from an identical survey conducted last year.
The survey also identified the areas that generate the most concern, for example, 65 percent of those surveyed anticipated rising fuel costs, 66 percent were fearful of rising utility prices and 72 percent are concerned that groceries will become more expensive during 2019.
Although certain retailers, like Next Plc., have reported better than expected sales, the stage is set for what analysts have called a “materially tougher” retail environment in 2019—a case the new information from Barclaycard certainly supports.
Footasylum, a youth-oriented footwear retailer, saw its margins slide during the holidays and Barry Brown, the executive chairman for the organization, said the high street was going through “some of the most difficult trading conditions seen in recent years.” If spending remains low, it’s unlikely that will change anytime soon.
“Despite a desire to support their local high street, Brits expect to cut back in January and remain cautious amidst ongoing economic uncertainty,” Barclaycard’s Harwood said.