May 2023 Retail Spend Data Headlines across 62 UK City Centres
- City centre retail sales in the first five months of 2023 (Year-To-Date or YTD) were up +8% on 2022.
- May 2023’s +3% growth vs May 2022 was the lowest month-on-month sales growth so far this year; compared to Jan 2023 vs Jan 2022 +13%, Feb 2023 vs Feb 2022 +10%, March 2023 vs March 2022 +8%, April 2023 vs April 2022 +7%. May’s lower growth in sales may be due to impacts of 3 Bank Holidays and the King’s Coronation.
- Fashion and General Retail remain weak, and Grocery remains strong.
- While Food & Drink’s YTD growth compared to 2022 and 2019 is strong, its growth is now slowing.
- Health & Beauty has shown the strongest year-on-year growth. Its sales are now back above 2019 levels and it is maintaining more sales momentum than Food & Drink.
- Eight of the top ten cities in terms of sales growth are in the North of England and eight of the bottom ten are from the South and the Midlands.
- While some of these growth rates can be attributed to inflation, this does not explain the strength or weakness of retail sectors.
- City centre retail does not seem to be reverting back to pre-covid normality. There is continued strong growth in sectors that require in-person transactions and ongoing weakness from General Retail and Fashion.
Overview
City centre retail sales in the first five months of 2023 (Year-To-Date or YTD) were up +8% on 2022. This time last year, however, sales were still significantly below 2019 levels, meaning that three years after lockdowns started, city centre retail sales are still only up +4% up on 2019.
There is some evidence that the growth in sales is slowing down as we move further into 2023. January 2023 sales were +13% ahead of January 2022 sales, while May 2023 sales are just +3% ahead of May 2022. This might be because sales in early 2022 were depressed by the tail end of the Omicron wave, or it might be because of a genuine slowing of sales momentum.
Sector performance
Five sectors make up on average 80% of sales across the 62 city centres monitored by Beauclair: Fashion, Food & Drink, General Retail, Grocery, Health & Beauty.
The big losers since lockdown have been Fashion and General Retail, as the sectors still with sales below 2019 levels. These sectors also recorded the lowest levels of year-on-year growth over the first five months of 2023. General Retail grew sales by +5% since 2022, leaving sales still -26% down on 2019. Fashion has fared somewhat better with +7% growth since 2022, leaving it -5% below 2019.
By contrast, the big winners in the post-lockdown period, Grocery and Food & Drink, posted much stronger growth levels. Grocery sales grew +9% since 2022, taking them to +28% above pre-lockdown levels, while Food & drink posted +11% annual sales growth taking its sales to +45% above pre-lockdown levels.
Health & Beauty has shown the strongest year-on-year growth. In May 2022, its sales were -8% below 2019 levels, but with +13% year-on-year growth, its sales now sit at +4% above 2019 levels.
The slowdown in sales growth over 2023 also seem to be hitting the weakest sectors disproportionately. In January 2023, General Retail was showing +10% growth over January 2022. By May 2023, it was only showing +1% growth in sales compared to May 2022. The equivalent figures for Fashion were +14% and +4%.
While Grocery and Health & Beauty sales also slowed over the first months of 2023, their year-on-year drop was less quick. Grocery dropped from +12% to +7% and Health & Beauty dropped from +17% to +10%.
Interestingly, when looking at the speed with which sales have slowed in 2023, Food & Drink is closer to Fashion than to either Grocery or Health & Beauty. In January its sales were up +17% on January 2022, while in May they were up just +4% on May 2022.
City performance
Looking at city performance in the post-covid period, there is a striking north-south divide. Based on average YTD sales for 2023 vs 2022 and 2022 vs 2023, the clear winners are primarily in the North of England with eight of the top ten cities, namely: Barnsley, Liverpool, York, Blackpool, Wakefield, Newcastle, Burnley and Warrington. The other two cities are Glasgow and Swansea.
The 10 cities with the weakest recovery include five from the South and three from the Midlands, namely: Northampton, Coventry, Slough, Basildon, Birmingham, Southampton, Reading and Bournemouth. The other two are from the North, namely: Wigan and Stoke.
The role of inflation
While inflation is playing a significant role in these figures, it is difficult to pin down exactly what that role is. According to the ONS, the annual inflation rate for food and non-alcoholic drinks was over 19% in early 2023. It is thus no surprise that Food & Drink and Grocery sales have shown the greatest increase. The well-documented labour shortages in hospitality could be seen to be pushing costs higher, accounting for the stronger growth in Food & Drink sales. Likewise, according to the Centre for Cities’ Cost of Living Tracker (with data provided by Beauclair), cities in the North of England have experienced higher inflation which might account for their stronger growth in sales.
Inflation cannot however be the full explanation for the growth in sales. Fashion has also faced significant cost inflation but this has not translated into higher sales. Likewise, inflation is not the major cause of the decline of General Retail. And although Northern cities have seen the highest rates of inflation as documented by Centre for Cities, this has primarily been felt through higher spending on energy and petrol rather than on Grocery. Reduction in basket size and trading down between brands has helped to keep a lid on household food budgets for many.
Going back to normal?
There is little evidence from the sales data that city centre retail is reverting back to a pre-covid normality. Sectors that require in-person transactions such as Food & Drink and Health & Beauty have increased significantly in strength and General Retail does not look like it will recover from its doldrums. Although Fashion has shown better performance than General Retail, its recovery and its resilience in the face of the online challenge is far from clear.