UK retailers lose sparkle over Christmas — survey

LONDON — British retailers faced a slowdown in sales over the crucial Christmas trading period, survey data showed on Tuesday, as shoppers were squeezed by higher prices and stagnating wages.

Retail sales rose 1.4 per cent last month from a year earlier, according to a survey from the British Retail Consortium (BRC) and financial group KPMG. That compared with 1.7 per cent expansion in December 2016.

"With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts," said BRC Chief Executive Helen Dickinson.

"That made this year's festive period all the more nail-biting for non-food retailers, many of whom offered deep discounts in the last weeks before Christmas in the hope of something to celebrate".

Capital Economics analyst Finn McLaughlin agreed that consumers simply had less cash to buy goods and services.

"December's BRC retail sales monitor suggested that Christmas trading failed to provide much relief to retailers with spending growth broadly in line with its subdued average over the past year," McLaughlin said.

"The squeeze on real incomes has continued to leave consumers with less room for discretionary purchases."

Workers' wages are still being eroded by Brexit-fuelled inflation, recent official data showed.

Average weekly earnings rose by 2.5 per cent year-on-year in the three-month period to October. That lagged behind Britain's annual inflation rate of 3.1 per cent.

Since Britain voted to leave the European Union in June 2016, a drop in sterling — making imported goods more expensive — has pushed inflation upwards.

Meanwhile, publication of Tuesday's BRC survey comes as Britain's retailers reveal mixed Christmas fortunes.

Department store Debenhams issued a profits warning last week on poor festive sales, sending its share price tumbling.

However, clothing retailer Next reported rising Christmas sales on the back of a strong online performance.

Britain's biggest retailer, supermarket giant Tesco, and food-to-clothing chain Marks & Spencer publish their Christmas figures on Thursday.