If UK retailers and investors in the sector thought the situation was bad already, the worst is still to come, UBS warned, as rising energy bills put a squeeze on discretionary household spending.
On the back of "unsurprisingly" weak consumer spending data from Barclays, analysts at the bank forecast income available for discretionary spend will fall around 2-4% in 2022 and 2023.
Tying in with similar concerns raised by fellow analysts at Jefferies and not even going into the industry-side issues flagged by JPMorgan today, UBS noted the consumer spending report for August found that rising energy costs “are clearly a concern”.
Around 28% of those surveyed believing their current finances do not suffice to cover rising costs rising to 39% when the new energy price cap comes into effect on 1 October.
This has led to 31% of people to “assessing the necessity of each individual purchase” before spending on shopping.
So, while overall spending on non-essential items has not yet decline, several categories have started to see falls, including spending on clothing, which was down 1.9% year-on-year as consumers increasingly bought second-hand and from charity shops.
Spending on home improvements and DIY was down 5.5%, while shopping at furniture stores tumbled 11.9%.
Further to that, Asda’s income tracker revealed that the average household income available for discretionary spending per week declined 16.5% year-on-year in July to £204, with energy bills the biggest contributor, pushing the cost of essential spending up.
As a result, UBS said: “Unsurprisingly, consumer confidence in the UK remains at lows”.