U.K. Retail Sales Stay Subdued Amid Brexit Fears, Survey Finds

(Bloomberg) -- A downbeat picture of the U.K. retail sector emerged in the latest survey from the Confederation of British Industry.

Almost 50% of retailers complained of poor sales for the time of year in the three months through July, the highest figure since the financial crisis a decade ago.

A gauge of sales volumes was negative for a third month, with 42% saying they sold less a year earlier. While the reading was depressed by strong sales in July 2018, when a heatwave and the soccer World Cup prompted people to splurge, retailers hold out little hope of an improvement in August.

The figures published Thursday add to signs that consumers, whose spending has driven the economy during the Brexit crisis, are turning more cautious. They come a day after Prime Minister Boris Johnson took office, vowing to take Britain out of the European Union on Oct. 31 -- with or without a deal to cushion the blow.

The CBI said it was “hugely concerning” that its sales index, the net balance between firms saying sales rose and those reporting a decline, was now negative for the longest stretch since 2011. The gauge stood at minus 16 in July.

“Despite the recent pickup we’ve seen in households’ real earnings, the sun is clearly not shining on the British High Street,” said CBI Chief Economist Rain Newton-Smith. “The U.K. economy has reached a fork in the road. The new prime minister must now do everything in his power to achieve a good Brexit deal, thus protecting jobs and our economy.”

Official figures show retail sales grew 0.7% in the second quarter, less than half the pace of the previous three months. The economy as a whole is forecast to have contracted for the first time since 2012. The CBI survey is not always a reliable guide, however. Its key index plunged to crisis-era levels in June, only for the Office for National Statistics to report an unexpected increase in sales.

The weakest retail sectors in July were department stores, specialist food, DIY and clothing, according to the CBI survey, which questioned 46 firms between June 27 and July 16. Motor traders also posted another poor month.

To contact the reporter on this story: Olivia Konotey-Ahulu in London at okonoteyahul@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson, Brian Swint

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