The British Retail Consortium released its predictions for retail sales growth for 2023 and revealed that there are still a lot of challenges facing retail businesses including input costs and energy costs.
Kris Hamer, director of insight, at the British Retail Consortium, 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,” he said.
“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.”
The BRC report found that 2022 was characterised by low retail sales growth that has remained below current inflation, suggesting volumes were down compared to 2021. It said the trend is expected to continue into 2023. According to the model, food sales growth will also continue to outperform non-food categories.
Sales are expected to pick up in the second half of 2023 as inflation slows and consumer confidence improves, with growth of 3.6 per cent to 4.7 per cent compared with 1 per cent to 2.3 per cent in the first half. The analysis suggests that while food sales growth will fall slightly in the second half of the year, this will be at a slower rate than the anticipated decline in food inflation, meaning falls in volumes will ease over the period. Meanwhile, non-food sales will move from decline to growth.
“It has been an exceptionally difficult year for both consumers and retailers,” Mr Hamer said.
“At a time when many cost pressures were already increasing throughout the supply chain, the war in Ukraine pushed inflation into an upwards spiral — with energy and food prices increasing by over 10 per cent (YoY) during the second half of 2022.
“During this period, as inflation peaked and the cost-of-living crisis unfolded, total retail sales growth was 2.3 per cent. However, once inflation — rising to over 11 per cent across the economy — is accounted for, these figures represent falls in sales volumes for both food and non-food.”
