Sales hit their lowest levels in more than seven years in January as Brexit uncertainty continues to rock the retail sector, according to a new CBI survey.
The survey of 103 firms, just under half of which were retailers, showed sales in January were well below the average for the month and marked the lowest levels since November 2011.
While online sales rose in January, growth is expected to slow in the year to February, proving online retailers are also feeling the squeeze after a tough festive trading period.
Rain Newton-Smith, CBI chief economist, said: “The high street has had another challenging month, with retail sales volumes flat and well below average for the time of year.
“Pressures on the retail sector remain high, with consumer spending expected to remain fairly subdued and competition fierce.”
The survey comes amid reports consumer spending is down across the board as a result of Brexit anxiety, with only hotels, restaurants and bars managing to buck the trend.
EY Item Club said consumer caution could be the reason for the dismal retail performance in the last month.
Consumers will only become more frugal as uncertainty over Brexit heightens, it added, predicting UK GDP growth will be weak in the first quarter of 2019.
Despite this, the survey showed retailers anticipate an increase in physical sales volumes and orders in February.
“Retailers look surprisingly optimistic about prospects for sales in February, with 24 per cent expecting sales volumes to be up year-on-year,” said Howard Archer, chief economic advisor at EY Item Club.
“This is the highest expectations balance for the month ahead since last May,” he added.
EY said this optimism is a reflection of retailers expecting consumer stockpiling ahead of the Brexit deadline in March.
According to the survey, retailers are placing more orders with suppliers than they did a year ago, with growth expected to increase by 22 per cent in February.
“There are early signs of companies bracing themselves for a no-deal Brexit: some of our wholesalers are now reporting that they’re building up stocks in case the UK exits the EU without a deal,” Newton-Smith said.
“It’s absolutely vital politicians act immediately to take no-deal off the table, protect the UK economy and avoid devastating disruption.”