Britain's consumer confidence 'crushed'

Consumer confidence in the United Kingdom has been "crushed" by the cost of living crisis, according to new data that showed retail sales have declined for the first time in 15 months.

Tracking figures, from accountants KPMG and the British Retail Consortium industry body known as the BRC, showed retail sales dropped at an annual rate of 0.3 percent last month, down from a 3.1 percent increase in March.

The BRC-KPMG Retail Sales Monitor indicated consumers had reined in their spending on furniture, electrical equipment and other household items.

In a news release, BRC chief executive Helen Dickinson said: "The rising cost of living has crushed consumer confidence and put the brakes on consumer spending. Sales growth has been slowing since January, though the real extent of this decline has been masked by rising inflation. Customers face a difficult year, with the Bank of England predicting inflation to reach more than 10 percent."

The BRC said that rising commodity prices, transport costs, labor shortages, delays at ports, and the conflict in Ukraine all brought higher costs to retailers.

Compared to pre-COVID-19 pandemic times, sales were 3.9 percent higher than in April 2019.

"Further headwinds are incoming, such as rising global food prices, which rose 13 percent between March and April. Retailers will continue to do all they can to mitigate the effects of these costs rises but, unfortunately, they cannot absorb them all," said Dickinson.

The Bank of England last week increased interest rates in the UK to a 13-year high of 1 percent to curb surging inflation, a move that analysts say may force retailers to hike prices.

In comments issued with the news release, Paul Martin, UK head of retail at KPMG, said: "With interest rates and inflation rising and the Bank of England warning of a possible recession, the squeeze on disposable household income is starting to have an impact on the high street.

"Many retailers 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 behavior, prompting a decline in the health of the retail sector and possibly more casualties on the high street."

One positive finding from the data was spending on hotels, resorts and accommodation going up by 16.6 percent compared with three years ago, the category's highest growth since September last year.