Concerns have been raised over the UK economy as consumers cut back on spending in October.
According to Visa, consumer spending shrunk by two percent in October – the fifth monthly decline and the biggest year-on-year decline since 2009.
“The unseasonably warm weather did not help, but the clothing sector has been struggling to increase sales since the beginning of this year,” said Mark Antipof, Visa’s chief commercial officer.
“This is reflected more broadly in high street performance, with spending falling for the sixth month in a row,”
Visa blamed the decline in consumer spending on wages that are failing to keep up with inflation, as well as the uncertainty surrounding Brexit.
Marketing and insights director at Springboard, Diane Wehrle, said: “Both high streets and shopping centres are clearly under pressure, with footfall during retail trading hours dropping by more than 3 percent in each,”
“And the fact that retail park footfall slipped into negative territory – even during daytime hours – whilst prior to November recording seven consecutive months of growth, is definitive evidence of consumers tightening their purse strings.”
On Thursday, official retail sales figures will be released and will confirm the drop in spending. Retailers are feeling the effects of the drop in consumer spending. Next (LON:NXT) was warned of “extremely volatile” trading. Shares in the high street retailer fell almost 10 percent after reporting a 7.7 percent drop in takings in the three months to 29 October.
Marks & Spencer (LON:MKS) is increasing rate of closure of underperforming departments.
“It’s no wonder Debenhams and M&S are looking to close stores in some areas,” said John Webber, head of rating at Colliers International.
“Obviously retailers are having a tough time anyway – uncertainty over Brexit, rises in the ‘national living wage’, interest rates on the up and the rise of the internet retailers, who don’t have physical stores to pay business rates on. All of this is impacting on sales and profits of many businesses, who are feeling increasingly vulnerable.”