Retail giants to expand overseas as British shoppers feel squeeze

Food sales are the main driver of retail growth but are a major source of inflation as grain and fuel prices rise. Picture: Getty
Food sales are the main driver of retail growth but are a major source of inflation as grain and fuel prices rise. Picture: Getty
Share this article
Have your say

RETAILERS will increasingly turn to overseas markets for growth as UK shoppers continue to feel the squeeze on household budgets.

Spending in shops and online is expected to surge to £300.7 billion next year, but soaring inflation will mean consumers will pay more for a similar volume of goods.

According to a report compiled by Verdict Research for business analytics firm SAS, the total spent will be 1.8 per cent higher than 2012, but with inflation across the sector estimated at 1.1 per cent consumers will get just 0.7 per cent more goods for their money.

Maureen Hinton, director of research and analysis at Verdict, said: “UK retailing is set for another year of tough trading as the hoped-for economic recovery is put back further and austerity continues to reign.

“Though we are set to see the highest growth since the recession began consumers will be paying more in 2013 for the same items and, as a result, retailers will continue to look to international markets such as Europe, India and the USA for real growth opportunities.”

China, eastern Europe and North America will be the hottest markets for fashion chains such as Primark, H&M, Topshop and Marks & Spencer, Verdict says, while changes to foreign investment rules in India have made the country more attractive to Western companies. Ikea is mulling a plan to open 25 stores on the subcontinent while Topshop, Uniqlo and Max Mara are also considering entry.

Although well short of pre-recession levels, the 0.7 per cent real terms retail spending growth forecast for the UK would be the highest rate since the 2008-9 recession began. DIY and gardening are set to be retail’s strongest performing sector of 2013, according to the report.

The gardening sector will make a comeback after this year’s washout summer, while home-owners will make a start on decorating projects as they consider putting their house on the market. Music and video spending is set to be the biggest loser, shrinking by 6.3 per cent as cheaper options such as streaming grow in popularity.

Food, which accounts for 45 per cent of retail spending, remains the main driver behind retail growth at a total growth rate of 3.1 per cent, but is also the worst driver of inflation, which is being driven by increases in grain and fuel prices.

The forecast comes as the retail industry’s trade body called on MPs to help Britain’s struggling high streets by stepping up pressure on the UK government to reverse a planned 2.6 per cent rise in business rates due in April.

British Retail Consortium director-general Helen Dickinson said: “MPs understand that high streets are focal points for communities and essential to local economies. But many are facing a real endurance test and rising operating costs are making matters worse.”

The group says rates have risen by more than 10 per cent in the past two years, adding over half a billion pounds to retailers’ overheads.

A government spokesman said businesses faced no real-terms increase in rates, while around half a million small firms can benefit from the a tax break scheme that has been extended by another year so that about 330,000 pay no bill at all.