Growth in UK retail sales slowed last month as fears over the rising cost of living led to the sharpest drop in consumer confidence since the 2008 financial crisis, according to industry data.
The British Retail Consortium said total sales rose by 3.1% in March compared with the same month a year earlier, significantly down on the 6.7% increase in February and 12-month average growth rate of 10.3%.
Comparing March with the same month in 2019 before the Covid pandemic spread, total sales rose by 5.4%, as retailers warned rising inflation was beginning to hurt consumer spending.
Helen Dickinson, the chief executive of the BRC, said it was likely that strength in the total value of retail sales reflected the surge in prices rather than a rush by consumers back to the shops after the easing of pandemic restrictions.
“The rising cost of living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis,” she said.
“Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”
The latest snapshot compiled by the retail industry showed a rise in spending on beauty and fashion items before Mother’s Day – 27 March – while the fact that people were gradually returning to town and city centres was leading to an uptick in demand for clothes.
However, spending on food dropped by 6.1%, possibly due to a later Easter compared with a year earlier, and as consumers returned to eating out in restaurants and pubs after the Omicron variant had weighed on demand.
Susan Barratt, chief executive of the research organisation IGD, said the prospect of soaring prices had driven consumer confidence below levels last seen in December 2013 when the horsemeat scandal rocked the food industry.
“These challenges affect shoppers in different ways, with household cutbacks seeing less affluent shoppers skipping meals to save money,” she said.
“This volatile time is set to continue as the reality of the energy price increase, as well as general inflation, hits home for shoppers.”
Separate figures from Barclaycard showed consumer card spending rose by 17.7% in March, largely caused by an increase in fuel and food prices as households come under mounting pressure from living costs.
Barclaycard, the UK’s biggest credit card provider, processing nearly half of all card transactions, said shoppers were buying in bulk to save money, with many stocking up on non-perishable items and household supplies.
With petrol and diesel prices hitting a record high after Russia’s invasion of Ukraine drove up global energy markets, it said spending on fuel rose by 26.1%.
In response to high prices, surveys on behalf of the card provider showed 41% of people were changing the way they travel, including walking and cycling more, and cutting back on longer car journeys.
Jose Carvalho, head of consumer products at Barclaycard, said: “Rising fuel prices and household bills are clearly starting to influence consumer behaviour, with many Brits changing their travel and shopping habits to save money.
“While this may dampen growth in the months ahead, we shouldn’t overlook the expected heatwave later in April, and the Easter holidays, both of which are likely to boost non-essential spending.”