Unexpected Decline in UK Retail Sector – What does this mean for SMES?

Just as UK small retailers gear up for the crucial Christmas shopping period, a worrying decline in the retail market has been highlighted in a quarterly survey from KPMG/Ipsos Retail Think Tank (RTT).

Mainly exacerbated by a poor trading period for food retailers and a tough September for the fashion sector, the health of the retail market in the UK dropped for the first time since the final quarter of 2012.

It is hoped that consumer demand for the last few months of 2014 will provide the positive results this industry needs.

David McCorquodale, Head of Retail at KPMG UK, pinpointed the uncharacteristic mild September weather as a major contributor to the decline in fashion retail.

He said: “During the mild temperatures, we saw a multitude of mid-season discounting in an effort to kick start sales of winter clothing and reduce stock levels.

“Food sales have continued to go backwards and last quarter it was non-food propping up the UK retail market. With September being so poor, everyone has struggled and it has really impacted on the whole quarter.”

Small food retailers fear price war

With changes currently taking place at supermarket giant Tesco, many small food retailers are concerned about facing an unwinnable price war on the approach to Christmastime.

Decisions made by Dave Lewis, Group Chief Executive at Tesco, are expected to have far-reaching effects on the entire food sector going into the fourth quarter.

Retail consultant Nick Bubb said: “In recent months, food sales have been falling by an unparalleled degree. The decisions of the new CEO at Tesco could well be the overriding factor behind the retail health outcome for the next quarter.

“Margins for all food retailers will continue to be squeezed, and any announcement that leads to a food price war pre-Christmas will impact heavily on everyone.”