Retail sales plummet as Iran war hits consumer confidence
Retail sales plummeted by 1.3 per cent in April, as Brits cut back on spending amid increasing pressure from the war in Iran.
The huge fall in retail sales volumes in April was the largest since May last year and defied economists’ forecasts of a softer drop. This comes after a 0.6 per cent rise in March, according to the Office for National Statistics (ONS).
Retailers are ramping up pressure on Rachel Reeves to cut energy bills and red tape as they face cost inflation from the war in Iran and weakening consumer confidence.
In the three months to April, retail sales rose by 0.5 per cent, driven by the cosmetic and telecoms sectors.
March’s jump in retail sales was driven by motorists stocking up on fuel to protect themselves from rising prices.
Fuel volumes fell in April, as some retailers suggested motorists were conserving fuel.
Fashion sales, particularly for large retailers, performed poorly in April due to falling consumer spend and bad weather.
Consumer confidence fell to a two-year low in April, according to research firm GfK, which found that Brits are stockpiling cash for essentials.
Brits feel strapped for cash
The British Retail Consortium (BRC) said the slowdown in retail sales shows that the Iran war is pushing shoppers to rein in their spending.
Harvir Dhillon, economist at the BRC, said: ““Discretionary spend is likely to drop further as the cost of living squeeze worsens.”
The government should prevent further inflation by cutting retailers’ energy bills and slashing taxes on packaging, he said.
Nicholas Found, head of commercial content at Retail Economics, said retailers are being “squeezed on both sides” by the Iran war.
“Ministers are pressing supermarkets to pass through savings and ease pressure on stretched households, yet retailers themselves are contending with rising wages, higher operating costs and margin pressure of their own,” he said.
Justin Parr, chief credit officer at trade finance provider Treyd, said: “UK retail businesses are contending with consumers whose spending power is under huge pressure from the rising cost of living.
“Broader economic data is now pointing towards higher inflation coming down the line along with increasing unemployment, meaning the operating environment is unlikely to get more benign any time soon.”
Iran war impact ‘to last eight months’
On Thursday, Rachel Reeves announced her “Great British Summer Savings” plan, intended to stem the rising cost of living caused by the Iran war and stimulate spending on retailers and other businesses.
The Chancellor said VAT would be cut for children’s food and access to entertainment, including museums and theme parks.
The plans, which Reeves said she will fund by closing a tax loophole used by energy companies, is set to cost the taxpayer £100m.
Last month, chief secretary to the Treasury Darren Jones warned the economic pain caused by the Middle East conflict could last for eight months after the war ends.