UK on the way to retail recovery

“We are at a pivotal moment. We have seen the end of the credit crunch, now we need to see the start of a recovery.” These were the optimistic words of Lord Wolfson at the Next first half earnings presentation on September 12.

His words echo the sentiment felt by many UK retail bosses who have seen clothing sales pick up in recent months. A recent spout of warm weather in the UK pushed shoppers out of the house and into stores in July and August resulting in a 2.2% increase in comparable sales according to the British Retail Consortium (BRC). In August alone, sales jumped 3.6% on a total basis or 1.8% in like-for-like sales.

The clothing sector in the United Kingdom has done well of late, coming out as the top segment for consumer spending in the non-food segment and even helped to boost online spending, which had reported its lowest growth rate since January 2010 in June and July of this year. Aside from the summer weather, experts have put increased consumer spending down to various national celebrations including the birth of the Royal Baby and British victories at Wimbledon and the Tour de France. Alongside a renewed desire shop, the average price for clothing and apparel in the United Kingdom dropped by 9.7% encouraging shoppers to part with their cash. According the Nielsen Shop Price index, the drop marked the biggest fall in prices since the index was set up in 2006.

Experts, however, remain cautious over the prolonged existence of this upward trend. "Retailers will now seek to sell through the remaining spring-summer lines but additionally will be hoping that an Indian summer does not come around which could jeopardize the demand for the autumn-winter ranges that are now in-store," said Clive Black, retail analyst at Shore Captial.

The Bank of England raised its third quarter economic growth forecast from 0.5% to 0.7% following improved household expenditure. Financial directors at some of Britain’s biggest retailers are also counting on a growth in the sector; according to a study conducted by RBS and BDO, four out five CFO’s questioned are expecting to see a bright financial spell over the coming year.

"If the better macro-economic news can be sustained into the mid-autumn, then the trade in general - and the survivors of the deep consumer recession - may be in for a most Merry Christmas," continued Clive Black.

But as we wait around for more good news, Britain is still facing difficulties in some sectors. According to study led by Conlumino, increased unemployment since 2007 has resulted in a major decrease in sales in the workwear sector which has missed out on 706 million pounds worth of sales over the past five years…