Retail sales fall at fastest rate since 2008 says CBI

Retail sales volumes and orders both fell at their fastest since December 2008 in the year to August, according to figures released by the CBI, which also revealed that sentiment was "crumbling" among retailers.

According to the latest quarterly Distributive Trades Survey, conditions have further deteriorated, with investment intentions for the year ahead staying negative for the sixth consecutive quarter.

Only non-store retailing posted a rise in sales, while volumes dropped across most other sectors, including in grocers, clothing and hardware & DIY.

Online sales growth remained below its long-run average, with the rise similar to last month, and the same pace of growth expected to continue next month. Stock levels compared to expected sales spiked higher, matching the survey record high seen in November 2014.

Anna Leach, CBI Deputy Chief Economist, said: “Sentiment is crumbling among retailers, and unexpectedly weak sales have led to a large overhang of stocks. With investment intentions for the year ahead and employment down, retailers expect a chilly few months ahead.

“It is unsurprising that business confidence has deteriorated sharply, with a potential no-deal Brexit on the horizon. But retailers are also buckling under the cumulative burden of costs, including an outdated business rates system and the apprenticeship levy. Businesses will be looking for government action at the Budget in the coming months to alleviate some of these pressures.”

Some 50 retail chiefs have already written to Chancellor Sajid Javid to call for "fundamental reforms" to the business rates system, which places an undue burden on retailers. Retail accounts for 5% of the economy yet pays 25% of all business rates.

The letter was co-ordinated by the British Retail Consortium (BRC) and signatories included the bosses of M&S, River Island and Harrods.

Key findings from the CBI's study of retailers included:

• 10% of respondents reported that sales volumes were up on a year ago in August, while 58% said they were down, giving a balance of -49%
• Retailers expect sales volumes to fall at a slower pace next month (-10%), with 14% expecting a rise and 24% expecting a fall
• Sales were seen as slightly below average for the time of year, but to a lesser degree than last month, with 15% saying they were good, 54% saying they were average and 21% saying they were poor. This gave a rounded balance of -6%.
• Orders placed upon suppliers fell at the quickest rate since December 2008, with 10% of survey respondents reporting an increase and 67% reporting a fall, giving a balance of -57%. Orders are expected to fall again in September, albeit at a slower pace (-29%)
• 2% of respondents expect the business situation to improve over the next three months, with 27% expecting a deterioration, giving a rounded balance of -25%.
• 16% of retailers intended to invest more over the next 12 months compared to the previous 12 months, whilst 35% expect to invest less, giving a balance of -19%.
• Average selling prices compared to a year ago picked up somewhat (+67%), but are expected to grow more slowly next month (+35%).