BRC Survey Points to Summer Lull in U.K. Cost of Living Crisis

By Geoffrey Smith

Investing.com -- A hot, COVID-free summer and an unusually successful soccer tournament supported U.K. retailers in July, but cost-of-living pressures are likely to return again as the summer ends, the British Retail Consortium said in its survey for July.

Retail sales rose 1.6% last month on a like-for-like basis, according to the BRC's monthly Retail Sales Monitor, a stronger outcome than the 1.3% drop expected ahead of time by analysts and the first rise in five months.

Spending on food and drink in stores was the strongest sector, rising 1.8% on a comparable basis, while non-food spending rose 1.2%, flattening out after a 34% rebound on average from two years dominated by the pandemic. The start of government income support payments, and the success of the England women's soccer team in the European Championships, both contributed to that, the BRC said.

"Despite consumer polls suggesting confidence is at an all-time low, this hasn’t translated to money not being spent at the tills, as consumers are determined to enjoy delayed holidays and an unrestricted summer," KPMG's head of U.K. retail Paul Marin said in the BRC's statement. "Pent up demand, especially for new clothes, has so far been at significant enough levels to keep the overall retail sector in relatively good health. With travel and summer socialising back on the agenda, retailers will be hoping the feel good factor continues into August."

However, the BRC warned that the figures were "flattered" by inflation, which masked an actual drop in sales volumes.

"With inflation at over 9% many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period," said BRC head Helen Dickinson.

She warned that the pressure on consumers is likely to pick up again after the summer, when regulated household energy prices are set for another big increase. The Bank of England said last week that the next adjustment in regulator Ofgem's price cap could take inflation above 13% by the end of the year.

"Both consumers and retailers are in for a rocky road throughout the rest of 2022,” Dickinson said.