October 7, 2019 / 1:26 PM / a month ago

UPDATE 2-UK retailers suffer worst September on record, BRC says

(Adds comment from economist, background)

By Andy Bruce

LONDON, Oct 7 (Reuters) - British retailers endured their worst September since at least the mid-1990s as people spent money on entertainment instead, according to surveys that painted a muted picture of household demand ahead of Brexit.

In a potential warning sign for consumer spending, which has helped the economy in the run-up to Brexit, the British Retail Consortium said total retail sales values declined 1.3% in September compared with the same month last year.

Average growth over the last 12 months slowed to 0.2%, the weakest rate since the BRC began its records in 1995.

A separate survey published on Monday by payment card company Barclaycard showed broader consumer spending — which includes retail sales — rose by a “modest” 1.6% in annual terms in September.

While official data retail data have shown healthier consumer demand, surveys like the BRC’s have suggested household spending may be starting to wane, adding to worries about a possible recession even before Britain is due to leave the European Union later this month.

Several British retailers, including supermarkets Asda and Morrisons and home improvement group Kingfisher, have said uncertainty around Brexit was affecting their customers.

However, clothing retailer Next said a disappointing start to autumn trading was down to unusually warm weather in parts of Britain, rather than shoppers holding back on buying new items because of Brexit.

The Barclaycard survey showed 41% of Britons were “actively pessimistic” about their ability to spend on discretionary items, up five percentage points from August.

“With four months of negative sales growth since March, the ongoing political gridlock surrounding Brexit is harming both consumers and retailers,” BRC chief executive Helen Dickinson said.

But Samuel Tombs, an economist with consultancy Pantheon Macroeconomics, agreed the fall in September probably reflected warm weather during the month, which hit sales of winter clothing, rather than a more fundamental change.

“We continue to look for only a modest slowdown in year-over-year growth in households’ real spending to 1.8% in 2020, from 1.9% this year,” he wrote in a note to clients.

The BRC survey showed spending on non-food items fell as spending on essentials rose. Online sales of non-food items were the worst ever recorded.

By contrast, the Barclaycard report showed spending on entertainment — which includes cinema, sports and theatre tickets — increased by 4.7% in annual terms in September.

It also showed strong growth in digital services such as Netflix, Spotify and Amazon Prime. But confidence in the economy remained uncertain and one in eight consumers was stockpiling Christmas food and drink.

Both surveys had been due on Tuesday, but the BRC brought forward publication and Barclaycard followed suit. (Additional reporting by James Davey; editing by William Schomberg, Larry King)

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