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While the cost-of-living crisis has long been far from an abstract concept for many people – the impacts being very much felt in their living standards – we are now starting to see many of those impacts filter through in terms of cold, hard data that spells bad news for UK business.
Consumer spending affected by worst cost-of-living squeeze since the 1950s
As reported by The Guardian and elsewhere, the Confederation of British Industry (CBI) has released an industry snapshot showing a slump in UK retail sales during April.
The CBI’s data showed evidence that cash-strapped households were choosing to reduce their expenditure as their ability to make ends meet came under ever-greater pressure. Retailers in the UK saw a swift fall in their sales volumes over the month, as consumers grappled with spiralling gas and electricity bills, record fuel prices, and a steep rise in the cost of basic shopping.
Clothing and specialist food and drink shops were among the UK firms to see particularly quick falls in sales. Meanwhile, motor traders also reported poor sales in April, despite enjoying a good March.
How was the survey data gathered?
The CBI poll compiled responses from 108 companies in the UK, including 51 retailers, in the weeks immediately following Chancellor of the Exchequer Rishi Sunak’s Spring Statement. The results showed sales volumes that were poor for the time of year.
The membership organisation’s distributive trades survey showed a headline retail sales balance of -35 in April, a big drop from the +9 recorded for March. The reading was also a long way below the average of -3 that a poll of economists by Reuters had predicted.
The CBI said that some of the sales decline could be attributed to customers returning to spending a greater amount on services – such as holiday travel and eating out in restaurants and pubs – following the removal of COVID-19 restrictions. The pandemic lockdowns had seen soaring retail sales at a time when there were scarce opportunities to spend elsewhere.
In April, though, the situation was very different. With the start of the month having seen a 54% jump in the energy price cap, and petrol and diesel prices also increasing to record highs amid Russia’s war in Ukraine, there has been no shortage of cost pressures on the UK population in recent times.
This is without even accounting for the heightened taxes imposed on workers by the Government.
It can be no great surprise, then, that annual inflation reached 7% in March – the highest rate since 1992 – and economists have suggested that it could hit 10% during 2022.
CBI economist Martin Sartorius said that such high inflation indicated that the cost-of-living crisis would not be a thing of the past anytime soon.
He commented: “To combat these challenges, the Government will need to keep a close eye on support for vulnerable households and businesses struggling with higher energy prices. Meanwhile, going for growth must continue to be the Government’s primary domestic focus, as increasing productivity growth is the only sustainable route to raise living standards.”
Could we provide the accounting services and assistance your firm needs this year?
Whether it’s financial planning, tax, or accounting services in Plymouth, Newton Abbot or Wellington that your business could benefit from during 2022 and in the years to come, here at TS Partners, we can be by your side during this testing time for firms up and down the country.
To learn more about our solutions that could help make your own life easier as a business owner, please do not hesitate to enquire to our team today.
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