Retailers suffer worst footfall and spending for half a decade

 
Helen Cahill
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Boxing Day Bargain Hunters Hit The High Street
Footfall fell in January (Source: Getty)

Britain's retailers have been dealt another blow at the start of 2018, suffering the worst January for sales and footfall in half a decade.

Figures released today by retail experts Springboard show footfall dropped by 1.6 per cent last month, the worst result for January since 2013, with customer numbers on high streets falling by 1.9 per cent.

Furthermore, consumer spending declined 1.2 per cent, according to Visa, the first January fall for five years. High street spending slumped by as much as four per cent.

Read more: Warren Evans becomes latest retail casualty as it falls into administration

The decline in shopper numbers and spending has put even more pressure on a sector that is straining under the weight of costs from business rates, the national living wage and inflationary pressures.

Underscoring the difficulties faced by the industry, a report from Moore Stephens has found 19 per cent of fashion retailers are showing signs of financial distress, such as delayed payments to suppliers, and large drops in revenue.

Several household names have collapsed under the pressure, with fashion chain East and furniture retailer Warren Evans both falling into administration so far this year.

Read more: Another high street retailer has fallen into adminstration

Jeremy Willmont, head of restructuring and insolvency at Moore Stephens, said retailers were facing the most difficult trading conditions since the financial crisis.

“Fashion retailers have been hit by the perfect storm of rising costs, falling consumer spending and increased competition. All three have heaped pressure onto revenue and made profit margins difficult to maintain," he said.

Research from NatWest and consultancy Retail Economics published today has painted a similarly gloomy outlook, highlighting a tough consumer environment ahead for retailers, along with rising operating costs.

The report found almost a third of households expect their personal finances to weaken this year. Operating costs are expected to rise by around 2.5 per cent, having risen by 2.9 per cent in 2017. It is thought April's rise in the national living wage will cost the industry £1.5bn.

Boxing Day Bargain Hunters Hit The High Street
Analysts have forecast a number of retail administrations this year (Source: Getty)

However, the burden of business rates, which comprise around nine per cent of all operating costs, will ease slightly this year when the government brings forward plans to switch from RPI to CPI indexation for the planned rate rise in April. This will save retailers £60m in 2018-19.

With costs mounting amid a dreary domestic outlook, businesses will be looking to capitalise on a shopping bonanza over the Chinese New Year later this week, the biggest event in the Chinese calendar.

Over Chinese New Year, families gift each other red envelopes containing money, and luxury retailers will be hoping to entice Chinese tourists coming to the UK to shop. Data from Forward Keys has forecast an eight per cent rise in Chinese tourist numbers this year.

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