A new analysis by the British Retail Consortium (BRC) suggests that U.K. retail sales will grow between 2.3 percent to 3.5 percent in 2023.
The agency also noted that 2022 was characterized by low retail sales growth, which remained below current inflation, suggesting volumes were down compared to 2021, and that it expects the trend to continue into 2023. According to its model, food sales growth will continue to outperform non-food categories in 2023.
BRC forecasted sales would pick up in the second half of 2023 as inflation slows and consumer confidence improves, with a growth of 3.6 percent to 4.7 percent compared with 1 percent to 2.3 percent in the first half. The analysis also suggests that while food sales growth would fall slightly in the second half of 2023, it would be at a slower rate than the anticipated decline in food inflation, meaning falls in volume will ease over the period. Meanwhile, non-food sales would move from decline to growth.
The BRC reported that 2022 had been a challenging year for consumers and retailers. When cost pressures had increased in the supply chain, the war in Ukraine pushed inflation into an upward spiral, with energy and food prices rising by over 10 percent (YoY) during the second half of 2022. And as inflation peaked and the cost-of-living upheaval unfolded, total retail sales growth was 2.3 percent. However, the BRC reported that once inflation, rising to over 11 percent across the economy, is accounted for, these figures would represent falls in sales for both the food and non-food sectors.
Kris Hamer, director of Insight at the BRC, said, “The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5 billion as the government’s Energy Bill Relief Scheme comes to an end in March, putting ongoing upwards pressure on prices.
“There is cause for optimism in the second half of 2023 when we expect inflation to ease and improving consumer confidence to result in an improvement to sales growth and corresponding volumes.
“Despite facing huge cost pressures, retailers will continue to do all they can to keep prices affordable for their customers. The market remains very competitive, and every retailer will be striving to attract and retain customers as people continue to be discerning in their purchasing decisions.”
