A leading retail organisation supporting independents has warned of the need to support store costs and build consumer confidence following the rise in interest rates.
The Bank of England announced earlier this month that interest rates were rising to one per cent in a bid to curb increasing inflation. Rates have risen to one per cent from 0.75 per cent since December, and inflation is already rising at its fastest rate for 30 years, and is expected to breach 10 per cent by the end of the year.
The move has prompted the British Independent Retailers Association (Bira) to respond, commenting that it was “inevitable yet not surprising”. Bira’s CEO, Andrew Goodacre, commented: “This latest increase to one per cent seemed inevitable and we are not surprised to see revised forecasts expecting 10 per cent inflation by the end of the year. Since last summer, we have been warning of double digit supply chain inflation that would result in higher prices. However, retailers are doing all they can to limit the price increases as they recognise that the shoppers have less money to spend.
“Whilst we hope this latest increase reduces inflation, we worry that it will further damage consumer confidence and reduce expenditure. Furthermore, we are concerned about the rising cost of debt payments as a result in interest rate rises as many more independent retailers have increased levels of debt due to Covid. We feel that Government needs to review the options for paying back the bounce back loans and offer more flexibility to the businesses dealing with a tsunami of cost increases.”
Also highlighting the effect on retail is the British Retail Consortium (BRC), which flagged that the rising cost of living has put the brakes on spending.
On a total basis, sales decreased by 0.3 per cent in April, against an increase of 51.1 per cent in April 2021. This is below the three-month average growth of 3.2 per cent and the 12-month average growth of 6.4 per cent. On a three-year basis, total retail sales grew 3.9 per cent (Yo3Y) during April compared with the same month in 2019.
Over the three months to April, food sales decreased 1.8 per cent on a like-for-like basis and 1.3 per cent on a total basis. This is below the 12-month total average growth of 0.7 per cent. For the month of April, food was in growth year-on-year. Helen Dickinson OBE, Chief Executive at the BRC, commented: “The rising cost of living has crushed consumer confidence and put the brakes on consumer spending. Sales growth has been slowing since January, though the real extent of this decline has been masked by rising inflation.
“Customers face a difficult year, with the Bank of England predicting inflation to reach more than 10 per cent. Retailers are experiencing higher costs as a result of rising commodity prices,
transport costs, labour shortages, delays at ports, and the war in Ukraine. Further headwinds are incoming, such as rising global food prices, which rose 13 per cent between March and April. Retailers will continue to do all they can to mitigate the effects of these costs rises, but unfortunately, they cannot absorb them all.”