Retail sales in Britain suffered their largest fall in October since the financial crisis.
Figures from the Confederation of British Industry (CBI), a national business representative body, released on Thursday showed the reported sales balance plunged to minus 36 in October from plus 42 in September, well below the consensus of plus 14.
The British economy has performed better in the wake of the Brexit referendum vote in June last year than predicted by many experts before the vote.
British economic growth is driven currently by continued consumer spending.
However buoyant wage growth of 2.1 percent, underpinned by the lowest unemployment rate for 42 years, has been overhauled in recent months by consumer price inflation (CPI) which is now 3.0 percent, according to official figures released at the end of last week.
Inflation has been driven by the sharp fall in sterling against other currencies in the wake of the Brexit referendum vote, which has pushed up inflation from its 0.5 percent figure at that time.
The sharp fall represents a warning of possible headwinds to continued economic growth as Brexit uncertainty increases.
The value of retail sales to the British economy is about 5 percent of GDP, employing just under 3 million people in 300,000 retail outlets.
“With a hard Brexit and a no-trade deal scenario looming, the British retail sector is facing a cliff edge,” Dr. Daniele Bianchi of Warwick Business School told Xinhua.
“Increasing price pressure could only make things worse and potentially trigger a full-blown recession with significant consequences for employment and output,” Bianchi added.
Weak sterling in the aftermath of Brexit has put pressure on the retail industry, inflating stores’ import costs.
Bianchi said that inflation due to currency devaluation has put a strain on households’ spending.
“According to the ONS (the Office for National Statistics), store prices continue to rise across all store types reaching a year-on-year 3.3 percent non-seasonally adjusted growth level, the highest since 2013,” he added.
“Despite Brexiteers’ initial enthusiasm about how a weaker pound would be good for exports, the effect of Brexit for the retail sector is proving to be serious as retailers are beginning to really feel the pinch from higher inflation,” Bianchi said.
Survey participants are CBI member companies, reporting on sales in the first two weeks of October.