According to a KPMG/Ipsos Retail Think Tank (RTT) forecast, 2016 will see retail spending in the UK decrease in 2016 as consumers focus on home improvements and nights out.
The growth of retail sales will fall slightly this year, according to the RTT, by 1.7%, down from 1.8% in 2015, and that is despite consumers having more spare cash to spend.
Instead, the growth experienced in 2015 for pubs, hotels, and restaurants is set to continue as consumers use their extra money to go on nights out.
“Consumers are looking beyond retail for goods and services to spend their money on,” says retail analyst Maureen Hinton of Conlumino. “This is making it much harder for an oversubscribed retail sector. Leisure, culture, entertainment have shown much stronger growth than retail over the past five years and this trend is being exacerbated by an ageing population.”
As well as entertainment, consumers are also expected to plough money into their mortgages for early repayment, as well as paying tradesmen to make home improvements, all of which will take away from their retail spending.
Compounding the problem for retailers will be the implementation of the National Living Wage before April 2016. According to David McCorquodale, UK Head of Retail at KPMG, this will result in “a significant overnight increase to the cost base but much more complex than a simple rise in hourly rate as it has a knock on impact on, inter alia, pay differentials, staff discounts, tea breaks and pensions. It is further complicated with the wage set to increase for each of the next four years”.