Not as bad as it was is the new good, says CBI

UK retail is back on a fairly even keel, says the CBI's latest quarterly Distributive Trades Survey. But its Service Sector Survey is rather less cheerful...

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

Let’s look at what the shopkeepers had to say first. According to the 135 firms surveyed in the CBI Trades Survey – that’s 73 retailers, 48 wholesalers, and 14 motor traders - 34% notched up a sales increase in February, while 36% saw a reduction. That leaves a total of -2%: a vast improvement on last month’s survey (-22%), exceeding expectations by a whole 8%. Sales volumes are also pretty steady, balancing out at around -4%.

So, who’s doing the best business at the moment? Grocers and online retailers are the top dogs this month, with revenues up 55% and 71% respectively. But clothing retailers are looking a bit threadbare, reporting a 41% decrease in sales, the lowest figure since March 2009. While sales of hardware and DIY dropped by a staggering 90%. Are Britain’s homes steadily falling apart at the seams?

There’s not too much to get excited about in the near future either. Most of the CBI’s retailers think that sales will stay pretty flat into March, with an uplift of around 2%. Also, ‘investment intentions’ – the urge to splurge on big-ticket business products and services – is down by 43%. Judith McKenna, ASDA COO and chair of the CBI Distributive Trades Panel, said: ‘It’s good to see there are more positive signs on our high streets. But consumers are clearly continuing to focus their spending on day-to-day needs, rather than big ticket or luxury items. With disposable incomes under constant pressure, retailers remain concerned about the general business outlook for the rest of 2012.’

Continuing on the same not too good/not too bad theme, consumer services, which includes hotels, bars and restaurants, saw a sharp drop in business activity – around 23%. But it’s a hell of a lot better than the 41% decline in the previous survey (the Service Sector Survey weighs up business activity by quarter, rather than month). Profitability in the industry is down for the fifth consecutive quarter (-24%), although it’s declining more gradually now than in the previous three months (-31%). The number of people employed in Consumer Services also fell (-19%) for the ninth consecutive quarter – showing that it is one of the hardest hit sectors in the rising unemployment issue -  although the fall was smaller than had been expected by industry pundits, who set the figure at more like 33%.

Ian McCafferty, CBI Chief Economic Adviser, commented on the results: ‘Although volumes of business activity continued to worsen across the UK services sector in the past quarter compared with the previous quarter, there are some tentative signs that conditions may be levelling out,’ he said. ‘There’s been a slowdown in the rate of decline in business volumes for consumer services firms, and they expect this to continue in the coming three months.’

So, it’s not dire, but it’s not great. And nobody’s feeling all that confident that things are going to get better in the near future…

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