U.K. Retailers Warn Inflation Is Curbing

U.K. retailers warned of “clouds on the horizon” after recording a sharp slowdown in sales last month as higher prices cut into consumer spending power.

Sales were just 3.1% higher than in March 2021, when the country was still under coronavirus restrictions, the British Retail Consortium and consultancy KPMG said in report Tuesday. The gain reflected higher prices rather than consumers buying more goods, and food stores saw an outright decline.

The figures suggest the cost of living crisis is already being felt on the high street, with the fastest inflation in three decades, higher payroll taxes and the war in Ukraine set to deliver an unprecedented blow to living standards this year.

“There is concern on what this could mean for consumer confidence and the impact on discretionary spend,” said Don Williams, retail partner at KPMG. He said retailers are “walking a tightrope between absorbing rising costs themselves or passing these on to consumers.”

The increase in sales was less than half the average of the previous two months, and like-for-like sales declined. Food sales in March last year were boosted by an early Easter, an effect that may show up in data for April this year. However, the BRC saw few reasons for optimism overall, with consumer confidence “shaken” and much of in-store retail yet to return to pre-pandemic levels.

“Households are yet to feel the full impact of the recent rise in energy prices and national insurance changes,” said Helen Dickinson, chief executive of the BRC. “There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown. Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”

In a separate survey, Barclaycard said nine out of 10 consumers were concerned about the negative impact of rising household bills on their finances, leading many to change their travel and shopping habits to save money