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June Gloom for UK Retailers as Brexit Clouds Consumer Confidence

Britain’s decision to break away from the European Union is already impacting the high street.

Figures released Friday by accountancy firm BDO reveal a 3.6% decline in year-on-year sales in June—the worst in more than a decade.

The fashion sector experienced its second lowest monthly figure so far this year, as sales fell 4.9% compared to June 2015. Homewares were hit, too, dropping 6 percent year-on-year, while lifestyle goods inched down by 0.2%.

The month didn’t start out that way, however. BDO data showed that overall sales grew 3.8% year-on-year in the first week of June. But the aftermath of Brexit bruised retailers as the month wore on, plunging 3.1% in the second week as consumers started to worry. By the final week of June—two days after the referendum—sales were down 8.1% year-on-year.

June marked the fifth month in a row that the British high street reported negative growth. But it was the first time in almost a year that lifestyle, fashion and homewares all recorded declines in the same month. According to the latest BRC-Nielsen Shop Price Index, June was also the 38th month of deflation in the U.K.

“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,” Sophie Michael, head of retail and wholesale at BDO, said. “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.”