After a wet British summer, this week’s forecast predicts a gloomy start to autumn. In bad news for businesses, a cold ‘Arctic blast’ is set to send temperatures plummeting.
High street firms have already been dealing with slower consumer spending this summer. Record rain in June and July kept punters indoors, dampening seasonal events such as the Euro Championships, which hospitality businesses were relying on to spike sales.
When rain falls, sales numbers often follow. With temperatures set to drop sharply to single figures, retail and hospitality businesses should brace for glacial growth this arctic autumn.
Summer downpour, sales drought
Brits are famous for complaining about the weather. After a record soggy summer, though, UK retailers could be forgiven for joining in. As Q3 winds down, companies are now taking stock of their sales performance during the downpour. For many, the sales reports will make for grim reading.
At the end of July, the British Retail Consortium (BRC) revealed that prices fell for the seventh consecutive month in July, due to weak demand.
Even the giants are struggling. Last week, retail chain Primark revealed that sales in women’s clothing and footwear fell due to challenging weather in June. Profits at the budget retailer had been rising, while many other high street brands were entering administration. But AB Foods’ market share fell to 6.5% between January and June, as high street trade suffered.
Pubs, bars, and restaurants were also hit as consumers stayed indoors and away from beer gardens. Figures from the NIQ drinks tracker show a year-on-year drop of 5% in sales.
“The easing of inflation for consumers isn’t yet translating into extra spending, and the grey summer hasn’t given them many reasons to venture out to beer gardens and terraces,” said Jonathan Jones, CGA by NIQ’s managing director, UK and Ireland.
“Fingers will be crossed for a much brighter September and growth in confidence as we move towards the crucial final quarter of the year.”
Arctic blast could cool consumer spending
Jones might want to cross his toes too. All the signals are for a chilly autumn to set in, with temperatures expected to plummet to as low as 4C in the capital this week — in stark contrast to the 30C weather felt at the start of this month.
It’s a snap turnaround for businesses, who will now need to put away the deckchairs and grit their teeth for a season of slower spending.
Consumers will likely spend less on outdoor activities, which can mean everything from hiking to eating out. Al fresco dining will be avoided (unless you’re a hardy smoker) halving capacity for pubs and restaurants with outdoor seating.
Organisations who didn’t shift their summer stock, such as shorts and t-shirts, will need to clear out the inventory and start shifting window displays, as trends shift to cosy knitwear.
That said, some companies stand to benefit from the change. Analysts often refer to ‘the cold weather effect’; a phenomenon that results in consumers spending more during winter.
Most point to online shopping for the cause. With shoppers cooped up indoors, they may feel they are saving money, and feel justified to splash out on Deliveroo takeaways and next-day Amazon orders, boosting sales for ecommerce companies.
Winter Wonderland, business nightmare
The other side of the coin is that overheads will likely increase as businesses need to spend more on gas and electricity. Heating up your store or cafe is already one of the biggest expenses for businesses. With cold weather, the demand on utilities can double.
Jeremy Clarkson found this out recently when he was told that purchasing the necessary three-phase system to fuel his pub’s lighting and heating systems would cost £350,000.
In more extreme cases of cold weather, businesses may be forced to close or operate in reduced hours if staff are unable to get to work on time, or supplier deliveries are disrupted.
These might sound like downers, rather than disasters. But any impact on sales can have real consequences for retail and hospitality, both of which run on razor-thin profit margins.
Back in July, the new government confirmed its plans to reform business rates to cut bill payments and better support the UK high street. Small businesses will be hoping it is a big enough umbrella to weather this autumn’s incoming arctic storm.
