Following today’s (Thursday 2 August) increase in UK interest rates, Patrick O’Brien, UK Retail Research Director at GlobalData, a leading data and analytics company, offers his view:
“While the Bank of England believes that the UK economy is in strong enough shape to withstand an interest rate increase, UK retailers will be scratching their heads, wondering where this confidence is coming from.
“Consumer borrowing continues to climb, despite wages finally rising faster than inflation, but we do not believe that this is going to create a much needed boost for the high street. As Lord Wolfson made clear in Next’s results announcement on Wednesday, the hot weather clothing sales boost is bringing forward August spend, rather than creating additional spend.
“Food inflation has reduced the money consumers have left to spend on non-essential purchases, leading to increased trading down across retail. This is even happening in sectors not previously known for being price driven, such as kitchens and bathrooms, as Travis Perkins highlighted with its poor results at DIY retailer Wickes.
“Many retailers have collapsed this year, with more to come in the coming months. As retail braces itself for the possibility of tumultuous Brexit decisions, with talk of stockpiling in preparation for an exit from the EU, any dampening of shopper spending power, however slight, cannot be welcomed.”