High street braces for 'exceptionally tough' Christmas period

by · Mail Online

Britain's high street stores were today warned to expect an 'exceptionally tough festive period' amid concerns over the financial impact of the Budget tax raid.

Sales in stores last month were up by only 1.7 per cent annually, which advisory firm BDO said showed the UK high street's 'Golden Quarter' was off to a poor start.

Online sales growth has now outstripped in-store data for nine out of ten months this year, leading to fears that more retailers could leave towns and city centres.

Total in-store and online sales grew by 4.1 per cent - but this follows 'disastrous' figures in October 2023 when there was an overall sales decline of 1.7 per cent.

Fashion and homeware were among the worst performing sectors of the retail industry, with in-store sales up by just 0.5 per cent and 1.1 per cent respectively.

Sales in stores last month were up by only 1.7 per cent annually, according to BDO (file image)

BDO said that new Budget measures will have a major impact on retailers, adding further costs of more than £2.5billion annually and 'exacerbating existing pressures'.

Key figures from BDO High Street Tracker 

STORE

  • October 2024: +1.7%
  • October 2023 -1.0%

NON-STORE

  • October 2024: +9.1%
  • October 2023 -1.8%

TOTAL

  • October 2024: +4.1%
  • October 2023 -1.7%

Growth last month was driven primarily by online sales, which increased by 9.1 per cent compared to October last year when they fell 1.8 per cent, suggesting consumers are still choosing to spend online over in-store.

But in-store sales grew by just 1.7 per cent, compared to a fall of 1.0 per cent the previous year - and BDO said the new data masked the 'true poor performance of the sector'.

Sophie Michael, head of retail and wholesale at BDO, said: 'While this is an overall positive result, this growth is based on the disastrous sales figures recorded in October 2023. Sales volumes have also not recovered to 2022 levels, when retailers saw a post-pandemic boost.

'With this being the most important time of the year for the sector, if sales figures continue to follow this trajectory the industry is set for an exceptionally tough festive period.'

She added that heavy discounting events over the coming month such as Singles' Day in China on November 11 ahead of Black Friday on November 29 and Cyber Monday on December 2 will be 'even more crucial'.

Ms Michael continued: 'These results also reflect the trend we have seen for much of this year, with consumers spending more online versus in-store.

Monthly total like-for-like results for this year and last year are shown in the top graph from BDO. The second graph shows results for the lifestyle, fashion and homewares sectors

'Online discounts have likely had an impact on this consumer behaviour, eating further into squeezed profit margins.'

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She told how last week's Budget announcement by Chancellor Rachel Reeves - which was last week dubbed a £40billion 'tax bomb' - included a number of measures that will impact retailers.

Among those she cited were the 1.2 per cent increase to employer's National Insurance contributions; a larger than expected rise in the National Minimum Wage; and the reduction in the business rates relief available, taking effect from April 2025.

Ms Michael said: 'The measures announced last week have a significant impact on the sector and will likely be a barrier to further investment on the high street.

'Whilst announcements around longer-term reform to business rates will be welcomed by many, these improvements will not come into play until 2026.

Sophie Michael, head of retail and wholesale at BDO, said: 'If sales figures continue to follow this trajectory the industry is set for an exceptionally tough festive period'

'In combination with the additional costs from implementing the new Employment Rights bill, the proposed changes are predicted to put an additional cost burden on the sector of more than £2.5billion annually.'

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She described this as a 'huge hit for a low-margin sector and adds to the risk of retailers disappearing from our local communities and shifting more operations online'.

Ms Michael concluded: 'Both the economic and social impact of these losses to the high street should not be underestimated.

'October's sales have not provided a much-needed glimmer of hope. Now the Budget announcement is out of the way, all hopes will be pinned on a boost in consumer confidence and discretionary spending as Christmas edges closer.'

Separate data today revealed a boost in footfall across all UK retail destinations driven by Halloween, Diwali celebrations and the half-term school holidays.

Chancellor Rachel Reeves outside 11 Downing Street ahead of the Budget last Wednesday

Retail and property technology firm MRI Software said that the period from Sunday, October 27 to Friday, November 2 saw high streets record the biggest rise in foot traffic week-on-week, with shopping centres close behind.

Footfall rose by 6.9 per cent last week compared to the week before in all UK retail destinations – with high streets up 8.0 per cent, shopping centres up 7.9 per cent and retail parks up 3.3 per cent.

However, the firm added that in the same week last year, footfall had declined during the same period as schools had already reopened nationwide.

Footfall in Central London was 7.4 per cent higher week on week and up 18.6 per cent on last year.