UK retail sales slump, signalling an economic slowdown

The UK has seen retail sales decline as consumer spending tightens, signalling the country’s economy is starting to stutter.

UK Department store
Source: Bloomberg

In October, the retail sales fell by 0.5% compared with the previous month, with a strong decline of 3.0% in household goods following a particularly strong August and September, according to the Office of National Statistics (ONS).

The news suggest that consumers are tightening their belts after a relatively frivolous summer that saw sales boosted by a prolonged period of hot weather and the FIFA World Cup, with retailers and investors fearing that the UK economy is beginning to show signs of slowing down.

In the three months to October, retail sales increased by 0.4% compared to the same period a year ago, representing a slowdown in growth when compared with the strong set of summer sales, which reached a high of 2.3% in the three months to July, according to the ONS.

‘Retail sales slowed after a buoyant summer with the mild autumn hitting winter clothes sales,’ head of retail sales at the ONS said.

‘Household goods sales also fell in October following two consecutive months of strong home improvements sales,’ he added.

Debenhams faces uncertain future

The cloudy outlook for retail has led to high street department stores like Debenhams to see its share price take a tumble over the last few days.

The British retailer saw its share price fall to 4.5p a share in the middle of Thursday’s trading, leading to the company’s market cap to dip under £60 million before rebounding later that day, closing at 6.19p.

Five years ago, the company was trading at around 100p a share. The rapid decline in share price began shortly after two London-based suppliers severed ties with the retailer over fears that Debenhams may go bust, according to trade publication Drapers.

The publication reported that a few the retailer’s suppliers had cut ties or limited the amount of business they did with Debenhams, after credit insurers cut back on supplier cover.

Debenhams responded to the article by explaining that suppliers were ‘well aware’ of the actions taken by credit insurers and the retailer had sufficient supplies in the run up to the Christmas period.

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