Lull in consumer spending continues to hit retail sector
Consumer spending dropped again in November and retailers are being warned that the situation may not improve in the near future.
According to the Visa Consumer Spending Index, compiled by IHS Markit, household spending fell 0.9% year-on-year in November.
This followed the 2.1% year-on-year drop recorded in October and Visa has warned retailers that Christmas spending could be reduced for the first time since 2012.
Car purchasing and holiday spending plummeted in November, with transport and communications spending dropping by 6%, while expenditure on clothing and household goods was down by 2.1% and 2% respectively.
Some of these drops were negated by rises in eating out and beauty spending, which increased by 4.2% and 4.9%.
Annabel Fiddes, principal economist at IHS Markit, described UK consumer spending as 'relatively down'and blamed rising living costs alongside lacklustre wage growth.
She suggested that unless consumer confidence strengthens, the trends are unlikely to change which could present tough trading times for retailers.
The Visa figures are based on spending across the firm's credit, debit and prepaid cards, which account for around £1 in every £3 spent in the UK.
The drop is spending will ultimately hit the bottom line of retailers across the country and it will likely cause cash flow issues for those that have not planned ahead.
However, those with contingency plans in place should be able to source better outcomes if they are left facing insolvency or other financial pressures.
If one strategy fails or does not achieve the desired results, further options can then be considered to safeguard the company.
Alternatively, retailers may want to take action before they experience difficult trading conditions by changing structures or creating new entities.
Solvent restructuring can help to streamline a business, removing unnecessary financial reporting requirements, cutting administrative burdens and reducing time management.
By Phil Smith