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High Street Perks Up, Strong Cash Flow Will Sustain It

Shoppers hit the high street in their droves last month, helping retail sales to bounce back and grow at the sharpest rate in four years.

 

The high street has not been in the best shape in the past year. The so-called retail apocalypse has taken down multiple high street retailers. Household names such as Toys R Us and Maplin have been forced to close their doors indefinitely after failing to find a suitable buyer. For months consumer confidence has been at a devastating low, with high inflation and prolonged Brexit uncertainty forcing consumers to hesitate with large purchases.

However, it seems retailers have finally caught a break, as sales have slowly increased.  New figures from the British Retail Consortium and KPMG showed retail sales up by 4.1 percent in May compared with a year earlier. This was the highest rate of growth since January 2014.

Fading inflation, low-interest rates and the uplift in food and drink sales after the Royal Wedding, have been factored into the shift in momentum. Also, as wage growth and employment figures remain steady, the squeeze on households has been released, giving consumers a stronger inclination to purchase non-essential items.

The upturn in sales is good news for retailers but does highlight the unpredictability of economic behaviour. To offset any future downturns, as well as preserve current profits, business owners should keep a close eye on business finances.

At the Credit Protection Association, we not only provide our members with extra cash but advise them on how to protect it. Our recovery services will provide the financial power to purchase new machinery or a larger workforce, but we also insist our members utilise our credit checks and status reports. Without conducting these checks on customers and suppliers, a shift in fortunes could prove devasting.

Paul Martin, UK head of retail at KPMG, said: “Two bank holiday weekends, a royal wedding and of course sunnier spells will have been the main drivers behind the apparent rebound, with both online and high street sales thankfully up overall.”

Spending in physical stores also rebounded with the best showing in 16 months, alongside an 11.9 percent rise in online sales.

Helen Dickinson, chief executive of the BRC, warned that there was no room for complacency among retailers. “Despite this more positive set of sales results, the retail environment remains extremely challenging, with trend growth still very low by historical standards,” she said.

Separate figures from Barclaycard showed consumer spending on its cards grew by 5.1 percent in the year to May, the highest level since April last year.

 

The upbeat figures for May will come as welcome relief to retailers. In a torrid first four months of the year, several established high street names have issued profit warnings, closed stores or gone into administration. Wintry weather in February and March also caused retail sales to suffer their biggest quarterly fall in a year.

The so-called retail apocalypse has been weighing down on retailers, with low profits diving many into insolvency proceedings. Company Voluntary Arrangements (CVA) have been undertaken by a multitude of brands, from Mothercare and Italian restaurant Prezzo to the most recent announcement from House of Fraser. High street stores have been forced to compete with online retailers for the few spendthrifts left, with online discounts and one-day deliveries dominating consumer attention.

Now that the economic landscape has improved, so have sales, and while this could prove to be long-term, business owners should prepare for every eventuality. Whether sales dip or slip, conducting the correct checks on your own finances, as well as those of every customer and supplier, should become second nature for all businesses.

At the Credit Protection Association, while we recover owed funds to our members, our credit management products keep this new cash and our members’ new financial stability protected. Our credit checks and status reports give our members’ a rundown of all their customers and suppliers’ finances, pointing out the late payers and ensuring these do not return to the office on Monday.

 

Please call us on 0330 053 9263 to discuss how CPA can help your cashflow.
Alternatively, either email us or use our contact form.

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