Blackfriar: There seems to be little light at end of the retail tunnel

Carpetright In Robin Park
Carpetright In Robin Park
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2018 has been a grim year for retailers with the collapse of Maplin and Toys R Us and all the signs suggest there is more bad news to come.

On Wednesday we had disappointing updates from Carpetright, which could close loss-making stores; Moss Bros, which is seeing sluggish demand for suit hire; and B&Q owner Kingfisher, which reported uncertain trading in the UK.

In Yorkshire, we learned that carpet manufacturer Airea is to close its retail carpets business with the potential loss of 50 jobs as the trading environment deteriorates.

This comes on top of gloomy news from Doncaster-based DFS Furniture and Bradford-based double glazing firm Safestyle.

A poor performance from non-food retailers is often the first sign that the economy is heading for a serious downturn.

According to this month’s Lloyds Bank’s spending power report, 2018 is set to be the year of the “savvy spenders”, with more than half of people changing their money habits since the start of 2018.

Some 54​ per cent​ of people have altered their purchasing routines, while 60​ per cent​ have also changed their eating or going out habits since the start of 2018, ​

Of those who have changed their spending habits, a third have reduced spending on clothes and personal care items, and a fifth are turning to voucher codes and discount websites.

The average consumer tightening their belts claims to have reduced their spending by £21.53 a week since the start of the year.

​Meanwhile, only one in five ​people ​(22​ per cent​) think they will have more money in ​their pockets in ​six months’ time.

It is clear that many people are concerned about the pressure on their finances in 2018 and are looking at ways to reduce their outgoings.

A separate report from the British Retail Consortium and KPMG found that shoppers are dealing with the “financial reality” of their budgets being eaten up by essential spending, leaving less cash for discretionary purchases.

The fact is that consumers want to spend, they just don’t have the resources to do so. This spells a tough period ahead for big ticket retailers as people put off buying goods they can live ​without.

We have already seen this knock back DFS Furniture and Safestyle​. Both have been hit by consumers holding off on big ticket items.​ If your sofa is looking a bit shabby, you can live with it.​

The Hargreaves Lansdown Investor Confidence Index fell 10 per cent in March, from a reading of 73 in February to 66 this month.

The broker said market volatility, rising interest rates and Brexit all feature as causes given for concern in its latest survey of private investors.

Some investors say they have also been unsettled by the spate of financial difficulties encountered by high profile UK companies, most notably in the retail sector, and of course Carillion.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said sentiment towards the UK economy is actually even weaker than confidence in the UK stock market. He added that the gloomy news from the UK high street is not helping matters, although with inflation falling back and wage growth picking up, there looks to be some light at the end of the tunnel for the retail sector.

We have yet to see how many more retailers will go bust before we reach the end of that tunnel.

The Government also has to get its transitional deal past the 27 EU member states and of course, its own rebels who are furious that Britain will have to abide by EU fishing laws after March 2019.

Next, a bellwether for the retail sector, will announce full year results on Friday and analysts are expecting more disappointing news. Retailers are looking at a tough year ahead.