LONDON – The June 23 Brexit vote has eaten into consumer spending – but the damage isn’t as bad as expected.
In a report entitled “Post Brexit: A slip but not a slide,” Barclays said consumer spending in Britain grew 2.6 percent year-on-year in July, slower than the two previous months, but higher than March and April.
The British bank, citing Barclaycard data, said July spending was softer than in the months of June and May, which both registered growth of 3.6 percent.
However, it was still higher than April, which was up 1.9 percent, and March, which rose 1.6 percent. Online growth was 12.3 percent year-on-year in July, versus 15 percent in June.
Separately, the British Retail Consortium and KPMG reported that U.K. retail sales were up 1.1 percent on a like-for-like basis in July. On a total basis, sales were up 1.9 percent, the strongest growth since January.
“This month’s solid sales figures may come as a shock to some, given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” said Helen Dickinson, chief executive officer of the BRC.
“However, little has materially changed for most U.K. households in the wake of June 23, so it is not surprising to us that sales are simply responding to their normal underlying drivers.”
She said “a heavy month of promotions proved very successful in appealing to bargain-hungry shoppers,” and added that the question remains whether retailers can carry that success forward into full-price sales.
The big challenge is not Brexit, Dickinson believes, but rather “responding to rapid and complex change in consumer behavior in the midst of a highly competitive market.”
David McCorquodale, head of retail at KPMG, said that in July the warmer weather “helped blow away some of the post-referendum blues,” creating a feel-good factor and giving consumers a sense that “life goes on” following the initial shock of the Brexit vote.
He said fashion sales “improved markedly” versus June, due to well-timed promotions, holiday preparations and the warm weather.
“Sales of jewelry and watches also improved, as international consumers took advantage of the weaker sterling to splash out on more expensive purchases,” he added.
“For retailers, plans to improve productivity remain top of mind to guard against recent increases to their cost base as well as making sure they can weather what are likely to be more uncertain times ahead,” McCorquodale said.