The British Retail Consortium has warned that consumer spending will slow further unless the government prioritises shoppers in the autumn Budget.
Responding to the Bank of England’s vote to put interest rates up for the first time in ten years from 0.25% to 0.5% Rachel Lund, head of retail insight and analytics at the BRC, called for “action” from the chancellor: “Higher rates in the current environment leave the chancellor some significant risks to prepare for, particularly as far as consumers are concerned. Consumer spending has slowed sharply in the last year as inflation, fuelled by the currency depreciation, has accelerated.
“At the same time wage growth has remained frustratingly weak and consumers have compensated by borrowing, with consumer credit returning to pre-crisis levels. Higher interest rates will only serve to curb borrowing, squeeze household finances - particularly for the less well off, and reduce spending. They will do nothing to increase wage growth.
“So, in an already challenging environment, without action from the chancellor in his budget this month, the risks of a further slowdown in consumer spending have become very real.”
This comes as the British Retail Consortium has called upon the government to “help shoppers budget” in a new report.
Targeted at the chancellor, the submission highlighted that as retail profits have dipped, labour costs have risen and the threat of soaring business rates looms ahead in April 2018.
Delivered on behalf of the retail industry, Helping Shoppers Budget highlighted that retail growth slowed from 2.3% in August 2014 to 1.6% in the same period this year, and that average retail profit margins have fallen by 1.7% since 2014 to 6.5%.
Recommendations within it include freezing the business rates multiplier, refraining from increasing income tax rates for a majority of taxpayers and accelerating plans to switch from setting business rates on RPI to CPI.
Within the report, BRC’s chief executive Helen Dickinson warned that without “decisive action” in the Budget, retailers face a £270m leap in business rates next spring, higher tax and regulatory costs - altering the attractiveness of investment options - and rising labour and property costs.
Dickinson said: “This will have consequences for town centres and jobs in less economically viable locations, and will inevitably be keenly felt in the most vulnerable communities.
“Ensuring that government decisions continue to support sustainable industry investment is essential as we look to remain a world leading industry that provides opportunities to people and communities across the UK.
“This is why we look to your upcoming budget for action to reduce the cost of doing business and keep down the cost of living, and to support retailers in becoming more productive.”