British shoppers impacted by the cost of living crisis will not start spending again until the new Labour government sets out its tax and spending plans, the head of Sainsbury's has said.
Chief executive of the UK’s second-largest supermarket group Simon Roberts told Reuters that despite falling inflation, higher wages and solid employment levels, UK shoppers remain nervous about spending on bigger ticket items.
Roberts, who has more than 35 years’ experience in the UK retail sector, said, “Discretionary markets continue to be difficult.
“Consumers inevitably are wanting to be clearer about what’s going to happen next and for that reason we see a continued caution in discretionary spending.”
Recent surveys have shown waning consumer confidence as Prime Minister Keir Starmer warned about the state of the British economy.
Starmer noted the likely need for tax increases in a 30 October budget, which prompted fears about trading in the run-up to Christmas.
Rates
Sainsbury’s has more than a 15% share of Britain’s grocery market, behind only Tesco.
However, a quarter of Sainsburys’ sales are from non-food products versus about 7% from Tesco, making it more vulnerable to a broader downturn.
Roberts said, “We need to see interest rates continue to come down because that directly impacts household spending.
“I think clarity in the budget, one way or another, is helpful.”
Analysts expect Britain’s central bank to cut borrowing costs in November after holding its key interest rate at 5% in September.
Despite economic uncertainty, Roberts is confident that UK shoppers will splash out on food and drinks at Christmas.
He said, “What we’ve seen over the last three or four years through the pandemic and the inflation crisis, Christmas has been a time when people in the end want to be together with their friends and family and loved ones.
“There’s absolutely no complacency at all in our business.
“We’ve had three strong Christmases and we’re preparing for a fourth one to come.”
Roberts added that Sainsbury’s was well-placed to benefit from what he saw as the big consumer themes for Christmas – more people dining at home than eating out, time-poor consumers preferring one shop for all their food and general merchandise needs, and a focus on value.
He said it was critical the government came through on its promise to fundamentally reform business rates, noting Sainsbury’s pays almost as much tax on its properties as it makes in operating profit.
Read More: UK Shop Prices Fall By The Most Since August 2021 – BRC
