UK retailers blame costs for job cuts and sales slump

Andy jalil – – Drop in sales and cut in employment have been blamed by beleaguered retailers in Britain on costs associated with the national living wage and the apprenticeship levy.
A survey by the British Retail Consortium (BRC) reveals that the number of jobs in the industry fell by 1.5 per cent in the second quarter compared to the same period a year ago.
More pain is expected as inflation heaps further costs onto the retail sector, which employs nearly five million.
A quarter of retailers responding to the BRC’s survey said that they would consider further cuts to hours and employee numbers to survive additional rises in costs. Chief executive of the BRC, Helen Dickenson, said the figures showed retailers were responding to changes in government policy by trending towards having fewer, but more productive, employees.
The new loses, exacerbated by costs arising from a weaker sterling, come after around 65,000 job cuts were made in the first quarter, when job numbers fell by 2.2 per cent.
The BRC said, “We expect to see hours and employment continue to fall. Fifteen per cent of retailers in the survey are expecting to reduce employment levels in the next quarter, compared to none in the second quarter of 2016.”
Dickenson added, “With consumers seeing inflation squeezing their spending power, the challenges facing the retailers will only increase in coming months; reinforcing the pressure on retailers to rethink and restructure their workforce.”
Independent retail analyst Richard Hyman agreed retailers were likely to keep shedding jobs for years. He said, “There is a strong whiff of panic about. This is the most difficult retail market anyone has ever seen. Retailers need to sit down with their stakeholders and explain the reality that they can’t deliver the same as they used to.”
The cuts in the second quarter were necessary despite retail sales growing by 2.7 per cent in the quarter, the industry body said, boosted by the late timing of Easter. Falling consumer confidence is predicted to weigh on retail sales during the second half of the year.
Retailers also continued to open shops despite the wider challenges in the economy. Hyman said the rise in stores was surprising due to the increasing importance of online retailers, and that businesses expanding their store estate might find “it’s a bit of a noose” in future.
Fashion retailers have experienced their worst July sales performance for eight years as shoppers turned away from stores, despite heavy discounts. According to figures now released by accountancy firm BDO, last month’s high street fashion sales fell by 3.5 per cent year-on-year.
Homeware performed far better, benefitting from a like-for-like sales lift of 5.8 per cent. Overall, sales on the high street fell by around 0.6 per cent.
BDO said the clothing sector was responsible for dragging the overall sales figure into negative territory for the month. Head of retail and wholesale at BDO, Sophie Michael said, “It is apparent that shoppers are diverting their attention to essentials and tightening their belts.” She added: “The concern here is that sales have diminished in a typical month for discounting, when retailers traditionally look to clear stocks to make room for new ranges.”
Retail sales account for around 30 per cent of household spending, which in turn accounts for around 60 per cent of UK GDP. Consumer spending was responsible for the surprisingly strong GDP growth in the wake of last year’s referendum.
But inflation was 2.6 per cent last month, up from just 0.6 per cent a year earlier, primarily reflecting the slump in the value of the pound in the wake of the Brexit vote, and outstripping nominal average wage growth.
“There may be a further slowdown to come if inflation does indeed reach 3 per cent as expected by ourselves and the Bank of England in the coming months,” said George Buckley of Nomura. The Federation of Small Business (FSB) said confidence among small retailers has plummeted over the first half of the year, as operating costs are at their highest in four years.
The Office for National Statistics reported that sales volume in food stores were up 1.5 per cent last month but that was largely offset by falling sales in non-food stores. Clothing and fuel sales volumes were both down, by 0.5 per cent and 1.1 per cent respectively.