UK Retail: Sorry, more bad news

UK Retail: Sorry, more bad news

Mike van Dulken, Head of Research at Accendo Markets, commented this morning:


Data yesterday showed UK wages growing faster than prices in February for the first time in a year, the first suggestion that a long-running burdensome squeeze on consumers may be easing. This buoyed hopes that the Bank of England (BoE) might feel less inclined to hike rates in May, and that a troubled retail sector might get a boost (bricks & mortar rather than online) by consumers having more to spend.


While some revised BoE views ushered GBP from its highs, giving the FTSE a corresponding boost, the market implied probability of a UK interest rise market remains at 85%, according to Bloomberg. And UK Inflation data today is expected to remain well above the BoE’s 2% target – headline CPI at 2.7% and the more relevant Core metric accelerating to 2.5% in March from 2.4% in Feb – keeping the pressure on Carney and Co. on Threadneedle St to hike in May.


All of which keeps similar pressure on UK Retail Sales (published tomorrow), already expected to post a bad March, with monthly growth contracting by -0.5% (from 0.8% in Feb) on account of severely cold weather and snow (BRC – Springboard Footfall and Vacancies Monitor suggested March footfall -6%, steepest year-on-year fall since end-2010) despite annual growth accelerating to 2.0% (from 1.5% in Feb) thanks to favourable Easter timing (earlier this year).


Which brings me to the latest bad news for the UK Retail sector, with property group Hammerson (recently targeted by French outfit Klépierre) abandoning its takeover of peer INTU Properties, a deal which had been on hold due to aforementioned French interference. And the reason? Yes, you guessed it, a troubled UK retail sector, or “current market dynamics in the UK” to employ corporate guff.


As HMSO points out, the market perception of UK retail property has deteriorated markedly following the raft of companies (retail, food) falling into administration, bankruptcy or required CVAs. Furthermore, consumer confidence remained subdued, likely until the wage/inflation squeeze abates, and Brexit uncertainty eases further.


Today’s decision by HMSO not to walk further INTU the proposed takeover is hardly a vote of confidence in the sector. HMSO shareholders are clearing welcoming news of the company taking on less risk. INTU shareholders are evidently disappointed that a deal (of convenience?) is now off the table.


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