Scottish retail recovery threatened by cost-of-living crisis as sales dip

Scotland’s tentative high street recovery looks increasingly threatened by the cost-of-living crisis after a fall in sales compared with pre-pandemic levels.

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales by value had dipped by 0.5 per cent last month, compared with April 2019.

While total food sales were up 3.5 per cent on this three-year measure, in part due to rising prices, total non-food sales were down by 3.9 per cent.

SRC director David Lonsdale said: “The value of Scottish retail sales was marginally down in April compared to the same period prior to the pandemic. Whilst the figures lost a little of their lustre from the more buoyant March, retail sales were still at their second highest level for two years and remained close to pre-pandemic levels. That said, the figures were flattered somewhat by rising shop price inflation.

“The retail recovery is still very much in its infancy and the outlook has to be tempered in light of the pressures on consumer spending. Household finances are under strain as inflation, tax rises and other bills take a bite out of shoppers’ purses and wallets.

“Disposable incomes simply do not stretch as far as they used to, presenting Scotland’s retailers with a more challenging marketplace.”

During April, several non-food categories such as clothing and accessories, footwear and beauty products turned in a “sprightlier” performance and edged closer to pre-pandemic levels, the SRC noted, boosted by a return to office working, more social occasions and holidaying.

Grocery sales got a boost from the timing of Easter and the return of family get-togethers, but sales of bigger ticket items such as electricals, household appliances and furniture were described as “lacklustre”.

The high street faces a stormy few months as the squeeze on consumer spending intensifies. Picture: David Mirzoeff/PA Wire

Paul Martin, partner and UK head of retail at KPMG, which helps to produce the monthly sales monitor, said: “The cost-of-living crisis came home to roost for Scottish retailers in April, with sales growth stalling after a relatively promising start to the year.

“Pressure on consumers tightened considerably with the increase in energy tariffs and the higher cost of food and other commodities. Easter holiday spending helped food sales grow, and while they are ahead of pre-pandemic levels, are unremarkable when inflation is taken into consideration.

“Against the backdrop of falling consumer confidence and a possible recession ahead, the retail sector faces a bumpy road with cost pressures from all directions,” he added.

“Many retailers may benefit from pent up demand in the short-term although in the mid-term will have no choice but to raise prices to protect margins.

“But the longer we see high inflation and real household incomes falling, the more likely it is that consumers will change their spending behaviour, prompting a decline in the health of the retail sector and possibly more casualties on the high street.”

Adjusted for the estimated effect of online sales, total non-food sales increased by 18.8 per cent in April versus April 2021. This is below the three-month average increase of 38.8 per cent and the 12-month average growth rate of 34 per cent.