Retailers fear continuing sales decline but CBI expects bounce

UK retailers saw sales volumes drop at the fastest rate in over four years in early July and expect the decline to continue at a similar pace in the coming month, according to a survey of the sector carried out after the Brexit vote.

With 24% of retailers saying that sales volumes were up in July compared with a year earlier and 38% saying they were down, this gave a balance of -14%, with expectations for August giving a -12% balance.

The survey was conducted between 28 June and 14 July with 132 firms that are, between them responsible for a third of employment in retailing.

July's fall after a balance of 4% growth in June was the fastest pace in over four years, CBI chief economist Rain Newton-Smith said, though she argued that while conditions in the retail sector have weakened there were several factors that could boost the sector in the medium-term.

"We should be careful about reading too much too soon, as consumers were likely to err on the side of caution in the immediate period following a vote to leave the EU.

“Current low levels of inflation and high overall employment should support consumer spending in the near term, although the impact of lower sterling is likely to feed through to higher inflation over time."

Within the retail sector, sales by grocers, and furniture and carpets stores were the main drivers of the drop in overall volumes. But some sectors bucked the trend, with non-specialised department stores and retailers of footwear and leather goods reporting higher volumes.

Orders placed with suppliers dropped at the fastest pace since March 2009 and are expected to fall further in August.

Meanwhile, sales within the motor trade continued to expand, albeit at slower pace than early this year.

The CBI survey follows UK retail sales from the Office for National Statistics last week which showed a smaller rise than expected for June, which was blamed on the unseasonably cold weather.