Shops across the country are facing a particularly difficult half-year as shoppers try to cope with higher prices by buying less, the UK retailers’ representation says.
The British Retail Consortium (BRC) predicts that sales will increase by a maximum of 2.3% in the first half of the year.
But sales should pick up in the second half of the year, the BRC said.
Retailers are also facing higher costs and government support for businesses’ energy bills is due to end in March.
“The first half of the year is expected to be challenging for households and retailers,” said Kris Hamer, director of Insight at the BRC.
“Continued inflation will make it appear that sales are rising, but we expect volumes to fall as consumers continue to control their spending,” he said.
When prices go up, customers can end up spending more even if they buy fewer items.
In 2022, many customers reined in spending as prices soared, spurred by the war in Ukraine, higher energy prices and the aftermath of the pandemic.
This Christmas was the first without Covid restrictions since 2019 and shoppers returned to the high streets in larger numbers. However, visitor numbers remained below pre-pandemic levels, hampered in part by rail strikes and severe weather.
- The high street shops are thriving after a tough year
“From a retailer’s perspective, there’s been a perfect print storm,” said retail analyst Richard Lim.
Some well-known names went under in 2022, including furniture retailer Made.com and clothing brands M&Co and Joules. Mr Lim said this is the “tip of the iceberg” compared to the number of companies he expects to face trouble in early 2023.
Many retailers face a reckoning in January when calculating whether Christmas sales were strong enough to offset slower business for the rest of the year.
However, modeling of the BRC suggests the outlook for the second half of the year is brighter.
“There is reason for optimism in the second half of 2023 if we expect inflation to ease and consumer confidence to rise,” Hamer said.
According to BRC, sales could increase by as much as 4.7% in the second half of the year.
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