UK consumer spending growth to slow, budget chains could benefit

By

Sandra Halliday

Published
Mar 20, 2017

UK consumer spending growth will slow to its weakest in four years during 2017 as inflation and other factors leave consumers with less money in their pockets and feeling less upbeat about their future prospects, economic think tank the EY Item club said Monday.

The prediction is bad news for fashion retailers with recent data showing fashion to be a lower priority than some other categories even when the economic backdrop was more buoyant. But it could benefit value-focused retailers such as Primark, Bonmarché, Poundland (which is adding its parent company’s budget fashion offer to its mix), and supermarkets like Lidl and Asda.

EY is predicting 1.7% growth this year, down from the 3.1% seen in 2016, which had been a 12-year high. And real earnings growth is forecast to be just 0.1%, after a 1.8% hike last year, due to the impact of rising inflation. It said those on the lowest incomes will be hurt the most and welfare cuts will be particularly significant here.

2018 should see some improvement with real wages growth of 0.7% but EY only expects consumers to notice growth in 2019.

It said that some momentum in consumer spending may be marinated as Britons dip into their savings.