EY comments on today’s ONS retail sales figures for February

Silvia Rindone, EY UK&I Retail Lead, comments:

“Retail sales improved for the second consecutive month in February, with volumes estimated to have increased by 1.2%.

“This is a welcome positive improvement, that shows some cautionary confidence from consumers. However, the 1.6% month-on-month increase in value terms is largely due to inflation. Looking ahead, growth within the retail sector is likely to be minimal.

“Rising prices continue to cause challenges for non-discretionary items as purse strings tighten. However, food store sales volumes rose by 0.9% in February 2023, improving on January’s rise of 0.1%.

“Despite confidence within the sector growing marginally, there remains a question mark over any continued growth.

“The Spring Budget saw no direct support for the retail sector, but the labour market reforms, including the provision of additional early years childcare support, will be welcome news to retailers who have been facing staff shortages.

“Retailers will also be contending with rising energy costs from the 1 April as the current Energy Bill Relief Scheme (EBRS) comes to an end. The scheme is being replaced by the Energy Bill Discount Scheme (EBDS) which is less generous than its predecessor, adding to the cost pressures the sector faces. Retailers will be inn a tough position as they  decide on how much of the rising costs to pass onto the consumer.

“While the retail sector continues to face a number of challenges, brands and retailers which are managing to adapt may see opportunities to acquire both customers and market share.

“Delivering an attractive value position at an effective price point will be critical to improving business resilience and growth.”