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UK recession fears grow as shoppers cut spending

Fears that the UK is heading for a winter recession have intensified amid signs Britain’s hard-pressed households are cutting spending as they save for Christmas and higher fuel bills.

Two monthly snapshots of retail activity found shops and online outlets struggling because of consumer budgets squeezed by dearer mortgages and the UK’s lingering cost of living crisis.

The British Retail Consortium – the industry’s lobby group – and Barclays said sales were down in October once inflation was considered for a possible recession.

The Bank of England has raised interest rates 14 times since December 2021. Still, the downbeat reports from retailers suggest Threadneedle Street’s action to bring down inflation has come at the expense of weaker consumer confidence and lower sales volumes.

Barclays said card spending rose by 2.6% in the year to October, significantly slower than the 6.7% inflation rate measured by the latest consumer prices index. The BRC/KPMG monitor of retail activity said sales were up 2.5% in October 2022 but stressed its figures were not adjusted for inflation.

News of the possible recession came as the latest health check on the UK construction sector from S&P Global and the Chartered Institute of Procurement and Supply (Cips) showed housebuilding contracting for an 11th successive month.

The S&P Global/Cips report showed all three construction categories – infrastructure, commercial property and housebuilding – below the 50 level, marking the cut-off point between a growing and declining sector. But of the three, housebuilding was the weakest, registering a score of 38.5.

Meanwhile, evidence that consumers are wary of committing to big-ticket items emerged from the latest car sales figures from the Society of Motor Manufacturers and Traders. These showed a nearly 30% year-on-year jump in fleet sales but only a 0.3% increase to 62,915 sales to private buyers.

The BRC’s chief executive, Helen Dickinson said: “Retail sales growth slowed as high mortgage and rental costs further shook consumer confidence. Many households are also delaying their Christmas spending hoping to grab a bargain in the upcoming Black Friday sales. The cost of living squeeze meant more was spent on lower-price indulgences, such as beauty products – the so-called ‘lipstick effect’. Meanwhile, the arrival of colder weather helped boost fashion sales, particularly for outdoor wear.”

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