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Latest: UK online retail figures

LONDON, UK - Since the pound dropped in value following last year’s EU Referendum, many shoppers have been stung by its effects. Inflation, which has been rising since the Government’s negotiations with the European Union commenced this year, has been blamed as one primary factor that has contributed towards consumers’ adapting spending habits.

Growth in retail sales volumes stagnated to 0.3 per cent in July, although the result exceeded analysts’ expectations of a 0.2 per cent figure. High street retailers were badly hit as well, with clothing and footwear shops experiencing a 0.5 per cent fall in sales last month. The annual rate of sales volume growth was 1.3 per cent in July, representing a 0.5 per cent decrease from June and an indicator of the decline in sales figures since last year. However, Brexit cannot be blamed entirely on this.

The poor weather conditions of the last two months have caused customers to change their spending routines in the face of unpredictable conditions. An Office for National Statistics analyst, Ole Black, welcomed June’s figures, but expressed concern over the vulnerable growth experienced in other sectors. Keith Richardson of Lloyds Bank also concurs with this analysis. B&Q and Kingfisher, who are two of Europe’s biggest home improvement retailers, reported that their second quarter of sales dropped because of a 10.7 per cent decline in the sale of seasonal goods like barbeques and garden furniture, caused by uncertain weather.

Despite this, there are plenty of other reasons to be optimistic about the willingness of British shoppers to support the UK’s retail sector. The food sector helped drive sales growth and produced a set of steady figures. This is despite a rise in “shrinkflation”, caused by a reduction in size of supermarket goods. Food stores witnessed their sales increase by 1.5 per cent this month, a 1.1 per cent jump from June.

However, PricewaterhouseCoopers expects food prices to rise very soon. Pork meat and rice commodity prices rose by 21 per cent and 11 per cent in May and June respectively. They expect this trend to continue.

With unemployment levels at their lowest since the 1970s, wage growth remains stagnant. The current 2.6 per cent inflation figure remains because fuel prices have stayed low. But soon, consumers could soon be hit by a 3.6 per cent hike in rail fares. The number of people decreasing their household spending is at its highest level for two years. Mike Cherry, Chairman of the Federation of Small Businesses, said this will amount to many problems for smaller companies, which include struggling to pay staff.

Amidst all this uncertainty triggered by Brexit lies another substantial factor that is aiding Britain’s economic recovery since the pound’s drop in value last year, and that is an expansion in online sales figures. Consumers are resorting to online spending. Online shopping has witnessed a 15.1 per cent increase in year-on-year sales and 0.3 per cent month-on-month. These figures now account for approximately 16 per cent of all retail spending.

Brexit has also failed to impact upon the number of online retail orders to the European Union. The proportion of orders going to the trading bloc is at its highest rate for four years. Order volumes increased by 13.9 per cent year-on-year in May, which shows a rapid recovery since a slump in sales last April. The bank holidays and the unexpected announcement of a general election contributed towards the latter month’s poor statistics.

The average order value is at its highest since 2011. The mean basket value was up by 18 per cent in May compared with the same month in 2016. Even though the figures represent a decrease in the number of orders being shipped to non-EU countries, they show that domestic orders being fulfilled to customers in the EU has been steadily increasing over the past 6 months. A 61.8 per cent rise in orders being shipped to European countries is the highest since records started in August 2013.

The growth in the volume of parcels outstripped online retail sales revenue in July by 11 per cent, which was caused by an expansion of discounted summer sales. The percentage of orders travelling to international destinations has generally increased. In July 2015, 24.4 per cent of all Delivery Index volumes were going across the border; in July 2016, it was 26.6 per cent and in July this year, it reached 29.6 per cent.

Andrew Starkey, head of e-logistics for IMRG, said EU customers are likely to be attracted by the UK market because of a strong currency and the discounts British sites offer them. Chris Hoskin, head of marketing for Metapack, said there is much to cheer about. But they are both concerned by the pound’s drop in value. Equally, they see no reason as to why these sales would decline once Britain has left the EU.

There is still a lot of positive economic news being filtered, but the Bank of England could do more to help ease uncertainty. Consumer debt has been rising since interest rates dropped in 2009 to 0.5 per cent. Governor Mark Carney’s decision last year to slash them to 0.25 per cent sent Brexit jitters into the economy. He is using Britain’s EU exit to score political points.

Also, the EU could do more to ease businesses Brexit anxieties. The Government wants a free trade deal that will ensure the UK continues to preserve its Single Market access. But by discussing EU citizens’ rights, Ireland and the divorce bill prior to trade, the European Commission has purposefully disrupted the negotiations, which is concerning. It is difficult to decide what the Irish border will look like if no trade agreement has been made. And this will greatly impact online retailers the most, who are still benefitting from EU trade.

It is clear online retailers are maintaining Britain’s economic growth. Like many other sectors, they need more confidence. If this trade can continue post-Brexit, there is no reason as to why politicians need to make this process complicated. Perhaps the decline in orders to non-EU countries demonstrates why the UK needs to leave this trading bloc; there are plenty of other nations to trade with beyond Europe.

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