UK retail figures are therefore alarming, with supermarket sales dropping across all four months. Consumer spending is down a record amount. As seen on Black Friday this year, the discounts were not motivating shoppers to spend like they have in past years.
In November, retail sales fell by 0.1%—a far cry from the 0.4% rise that analysts were expecting. It’s no surprise that the lead-up to the federal government’s budget announcement played a big role in this downslide, with weeks of speculation and uncertainty sapping consumer confidence. Rob Wood, a former Bank of England economist, said the long-term effect of such events tends to be a change in spending habits.
“The chaotic run-up to the Budget hit consumer spending, driving retail sales into two consecutive monthly falls after a run of four rises from June to September.” – Rob Wood
That dour sales climate was only made worse by a pile of government borrowing numbers that were just thunderously bad. Total UK borrowing was £11.7 billion in November, above the £10 billion that analysts had expected. This is a £1.9 billion drop on the corresponding month last year. It further represents the four-year low in borrowing for the month of November.
The government’s borrowing for the financial year to November has rocketed to £132.3 billion. Even with this reduction, this figure is £10 billion higher than it was this time last year – a record high. This rise is illustrative of the wider economic pressures and challenges which have made it difficult for the UK government to balance the public finances.
James Murray, a representative of the Treasury, emphasized the need for fiscal responsibility amidst these figures, stating that the government aims to “deliver on our pledge to cut debt and borrowing.” His quote goes right to the heart of the tightrope walk the administration has to do to keep continued economic growth without allowing debt levels to continue rising.
The continued drop in retail sales could be symptomatic of a larger pause among consumers when it comes to spending money on non-essentials. With fears of inflation and an ever-increasing cost of living, consumers are starting to be more careful with their spending. According to analysts, this is a trend that may have long-term effects for retailers as they move toward the holiday season.
As consumers assess their own financial futures, businesses will have to adjust their approaches to win back consumer trust. If Black Friday promotions didn’t successfully drive sales as planned, what does this mean for future marketing plans and pricing strategies?