Retail growth is expected to remain slow in 2023, says the British Retail Consortium (BRC).
The BRC expects retail sales to grow between 2.3% and 3.5%, at the same levels as 2022, with shop closures hitting a five-year high last year.
Forecasts from the BRC indicate that growth will pick up in the second half of 2023 as inflation potentially slows and consumer confidence improves.
That said, growth is expected to rise at a rate of 1% to 2.3% in the first half of the year before eventually rising to 4.7% in the second half.
The analysis suggests that food sales growth will fall but at a slower rate than anticipated, while non-food sales will move from decline to growth.
Kris Hamer, director of insight at the BRC, said:
"The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending.
"We also don't see many signs at this stage of retailers' input costs easing, with energy costs expected to rise to £7.5 billion as the Government's energy bills relief scheme comes to an end in March, putting ongoing upwards pressure on prices."
Store closures drive uncertainty
There was a sharp rise in the number of store closures in 2022, with more than 17,000 establishments closing their doors on the high street.
According to the Centre for Retail Research (CRR), the total number of closures over the last year was 50% higher than in 2021.
Research from the CRR suggests that shops were closing at a rate of 47 per day throughout 2022.
Nearly a third of the closures were branches of chains that were shutting up shops to save money or rationalise the business.
Joshua Bamfield, director at the CRR, said:
"Rather than company failure, rationalisation now seems to be the main driver for closures as retailers continue to reduce their cost base at pace."
Bamfield made a stark warning for 2023, saying that "a few big hitters may well fail, too".
IoD research shows an uptick of economic confidence
Although there are worries about the economic outlook for retail businesses across the UK, the Institute of Directors (IoD) has said there was a slight increase in economic confidence in the build-up to the new year.
However, there is a call for more support to help businesses tackle the rising rates of inflation.
The IoD directors' economic confidence index, which measures business leaders' optimism in the UK's economy, rose from -64 in November to -58 in December.
Of the 467 business leaders surveyed, the research shows that:
- 55% expect higher revenue in the next 12 months
- 30% expect higher business investment
- 31% expect higher employment.
Kitty Ussher, chief economist at the IoD, said:
"Confidence in the economy is still very low but is pointing upwards into the New Year. It is hugely encouraging, in particular, that the investment plans of IoD members are a little stronger in December than at any time in the last six months.
"Business leaders consider tackling inflation to be far-and-away the most important thing the Government can do to help them going into 2023."
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