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Interest rate rises and inflation point to “continued weakening in consumer demand”

Tom Bottomley
31 August 2023

The recent rises in interest rates and ongoing high levels of inflation are reflected in a continued weakening in consumer demand across UK retail destinations, according to the latest monthly footfall update from retail experts MRI Springboard.

Covering the four weeks from 30 July to 26 August 2023, footfall across all UK retail destinations rose by just 0.2%. That was versus a drop of -0.3% over the month from June to July 2023.

The rise in footfall in August was not large enough to offset the first monthly drop in footfall in July since MRI Springboard started publishing its data in 2009.

Other key findings include:

  • Footfall in high streets rose by 0.7% in August (compared to -1.7% in July), in shopping centres footfall rose by 0.7% in August (versus +1.7% in July) and in retail parks footfall was -1.5% lower in August than in July.
  • Weekday footfall rose by 2.7% in August from July, but footfall during the weekend period was -3.8% lower than in the month before. That was the third consecutive month when footfall during weekends underperformed the weekday period.
  • Footfall across UK retail destinations rose annually by 1.9% in August versus +2.1% in July and +4.2% in June. In high streets footfall in August was just +1.2% ahead of 2022 for the second month, versus an annual rise of 5.2% in June 2022. In shopping centres, the annual uplift narrowed slightly to +2.9% in August, versus +4.1% in July and +4.4% in June. In retail parks footfall was +2.2% higher than in 2022, versus +1.8% in both June and July.
  • The gap from the pre-pandemic footfall level narrowed to -11% in August from -12.1% in July, but was wider than -8.6% in June; in high streets the gap narrowed to -13.4% from -15.5% in July (-10.3% in June), in shopping centres the gap narrowed marginally to -14.8% (-14.9% in July) and in retail parks it widened to -1.8% from -1.6% in July.

Diane Wehrle, Insights Director at MRI Springboard, said: “Footfall performance in August points to a continuing weakening in consumer demand, which is unsurprising given the recent rises in interest rates and ongoing high level of inflation.

“Somewhat inevitably the weakening in consumer demand disproportionately impacts footfall over the weekend, when a far greater proportion of trips are leisure based, and therefore discretionary, rather than being for work related purposes.

“The reining in of consumer activity is also evident in a smaller annual uplift in footfall; in August footfall across all UK retail destinations was just 1.9% greater than in 2022, which was less than half the annual increase of +4.2% in June. And in high streets, the contraction in footfall growth was even more stark with a year-on-year increase of just 1.2% in August versus +5.2% in June.

“Despite the adverse outcome in August, a glimmer of optimism is provided by the fact that the gap from the 2019 footfall level narrowed marginally to -11% from -12.1% in July. However, with consumers already pulling back on their shopping activity – particularly leisure-based trips - it suggests that Q4 will lead to even more cautious buying behaviour, and a challenging trading landscape for UK retail over the festive period.”

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