Results are 'downbeat'

Tax rise fears adding to slump in retail sales

Princes St shoppingWorries over higher taxes are contributing to a slowdown in consumer spending, with Scottish retailers seeing some of the worst trading conditions for eight years.

Sales in April excluding food fell by 1.5% across all sectors – the weakest month for three years  – and even online sales could not offer any consolation.

Clothing and footwear posted their worst performance since the recession in 2008. Grocery sales, whilst down, were the best performing category and were in line with recent months.

The slump in retail trade comes as the future of Bhs remains uncertain and is bound to add to pressure on the newly-elected government to take action to ease cost pressures that will prevent further shop closures and job losses.

David Lonsdale, Director, Scottish Retail Consortium said: “Even adjusted for shop price inflation, which is falling at the moment, these results are somewhat downbeat.

“Customers remain cash-conscious and retail spending is fragile, perhaps weighed down by talk over recent weeks of higher taxes on wages and for council services.

“Hopefully our new MSPs can channel their collective energies into creating the conditions which help lift private sector growth and inject some much needed consumer spending and confidence into the economy.”

David McCorquodale, head of retail at KPMG, added: “The category which suffered most compared with last year was clothing and footwear.

“In 2015, a sunnier and warmer spell resulted in encouraging sales for Spring/Summer fashions. This year, however, the weather was cooler and mixed. The subdued conditions brought subdued sales and, despite promotions being run by major fashion retailers, it saw consumers making purchases at times when items can be worn rather than simply buying the latest arrivals in the stores.

“Larger ticket sales in the non-food category may have suffered from low consumer confidence and political uncertainty caused by the election and upcoming referendum. The grocery market continues to battle the headwinds of deflation and over-capacity, which is positive for the consumer but challenging for the retailers who strive to increase the loyalty of their customers.

“With the cost base of retailers permanently hit by the introduction of the National Living Wage, the relentless drive for improved sales and productivity is forcing them to consider their own business models. Some high profile retail failures remind us that adapting to survive is as important as ever for the future of the sector.”

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