As consumer confidence remains low due to increased costs and the higher minimum wage, retailers are expected to face a tough time in the first few months of 2024.
As per a report by the Retail Think Tank, a group of industry experts, consumer confidence continues to remain low due to surging mortgage and rental costs. Thus, it would affect retailers for the first few months of 2024.
The UK head of retail at advisory firm KPMG, Paul Martin, stated, “It is going to get worse.”
However, it has been anticipated that there would be a surge in demand in the spring, but as the minimum wage increases in April and the 6.7% business rate hike for most retailers takes effect, it would badly affect those who solely trade in the fashion sector.
The think tank concluded, “There will be pressure on consolidation,” advocating that buyout deals and mergers would likely occur.
Martin continued that Christmas has been “pretty subdued,” as many consumers refrained from buying expensive purchases such as furniture or big electrical goods.
As per the Office for National Statistics, retail sales in October fell by 2.7% year on year; even supermarkets barely managed to register growth in sales.
The independent retail analyst who also sits on the panel, Nick Bubb, stated: “The final quarter of 2023 saw a lackluster performance with volume pressure in non-food categories and the real sense that consumers are tightening their belts. Whilst a lot depends on what we see happen over the next few weeks, there has already been a lot of discounting, and this is likely to continue after Christmas as well.”
Although some consumers should have enough money as wage growth is finally outpacing inflation and cuts in fuel bills and national insurance contributions,. However, some experts think that consumers will keep pausing their spending in the first few months of 2024 due to the wider economy and high borrowing costs.
The Bank of England has made its intentions clear: to maintain interest rates at elevated levels. Thus, there would be no relief for those whose mortgage deals are coming to an end or car financing agreements require a loan while the economy manages to remain gloomy, undermining employment confidence and opportunities.
“Despite further falls in inflation and, from the middle of the year, the Bank of England potentially starting to reduce interest rates, we expect the UK economy will struggle to gain momentum in 2024. Household spending generally will only grow slowly, and likewise retail sales,” said another member of the panel, Charles Burton, at the analysis firm Oxford Economics.
However, there are a few sectors that are well within the consumer’s reach and will continue to survive and grow right through Christmas and well into the new year. The news for luxurious products and expensive furniture does not look pretty and will continue to record poor sales.
As per Burton, the Midlands, Scotland, and northeast of England are anticipated to be hit hard as job losses in the industrial sector will limit regional spending power.
- Published By Team Timeswire