UK retailers are hoping for a last-minute surge in spending this December, following a fall in consumer spending last month. Statistics show that UK retail sales dropped in November, with shoppers spending 0.1% less than they did in October this year, and nearly 3% less than they did in December last year.
Retail sales in the United Kingdom have remained flat for the past three months, and economists have called this slump in spending “the worst since September 2011”. What is the underlying cause of this notably slow festive spending season, which has become something of an ongoing trend in the UK?
Shoppers Tightening their Belts
When you consider the fact that retail prices and inflation rates are rising faster than salaries in the UK, it’s hardly surprising that during the 2012 Christmas shopping season, more and more consumers are increasingly wary of cutting into their savings. More British households have growing concerns about job security and financial stability, a sales trend that UK retailers have been experiencing since the global financial crisis first hit in 2008. While public holidays around the Olympic Games and the Queen’s Diamond Jubilee did lead to the occasional rise in sales during 2012, the bigger picture is one of subdued spending nationwide.
Consumer Confidence Down
According to data from leading research company GfK, consumer confidence in the country has also hit a slump. GfK’s consumer confidence index has experienced a seven-point drop in the past month, landing at -29. Four out of every five consumers polled expressed a negative outlook on their personal finances, and the economy as a whole.
The Good News
On a more optimistic note, it seems most consumers expect their personal finances to hold steady and remain largely unchanged in 2013, although they do predict that the country’s general economic situation may worsen. In addition, despite the month-on-month drop in consumer confidence, UK retailers will be pleased to know that GfK’s index was up by 8 points in November – the highest rise experienced since the index was first introduced in 1974.
Consumer confidence and sustainable economic growth go hand-in-hand; if consumers expect their personal finance figures to stay the same in the coming year, it’s possible that we could start to see a gradual rise in confidence and an eventual rise in UK retail sales. More cautious spending and saving this festive season could lead to a more lucrative run for retail business owners in the year to come.
Nicky Warner is a London-based blogger with a keen eye for business news; she hopes to write more about international businesses and Dallas executive suites in the year to come.
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