SCOTLAND 2015 FACING A GROWTH WASH-OUT

Our editor BILL JAMIESON blames it on the weather. Let’s hope it really is just the weather, because Scotland looks on course for one of its worst business summers in years.

Figures this week showed unemployment north of the border now significantly higher than the rest of the UK. Unemployment rose by 1,000 in the three months to April, with the rate now at 5.9 per cent – notably higher than the rest of the UK where the jobless numbers fell.

It’s the second month when Scottish figures have disappointed.

But the big talker of the week has been the stinky weather. After a brief improvement last week it has turned cold and wet … yet again.

Rain, winds and well below-average temperatures are wreaking havoc for outdoor events, tourist hotspots, leisure spend – and now retail sales.

Total Scottish sales tumbled 3.1 per cent last month compared with a year ago – which wasn’t too hot, either.

Like-for-like sales (broadly screening out new store openings) were down 3.5 per cent. Adjusted for deflation, the total sales fall is reckoned at 1.2 per cent.

That’s the steepest decline since November 2012.

After a brief burst of warm weather in mid-April, Scotland had a miserable May as cold temperatures set in.

It was an unsettled month which became increasingly wet with strong winds. It remained unsettled and chilly with large rainfall totals for much of the time.

Overall, the mean temperature was 1.2 °C below the long-term average, making it the coldest May since 1996. Rainfall was 177% of average, the fourth wettest May since 1910 and reached more than twice the norm in some places.

Worryingly, the windfall effect of lower petrol prices sparking a rise in consumer spending on other items has just not materialised. Households are saving the money and staying indoors rather than brave the wind and rain of the high streets.

This may be due to a combination of factors including political uncertainty, a reluctance to take on further debt and concerns over possible tax rises in Scotland on the horizon.

But there’s no doubt the poor weather has been the dominant factor.

Scotland had been hoping that after the massive global attention Scotland enjoyed last year with the Commonwealth Games and independence referendum, there would be a boom in overseas visitors.

Some ‘high end’ tourist hotels saw higher bookings. But this effect may now be offset by a fall in domestic bookings as residents flee to Spain, Cyprus and Tenerife.

After adjusting for the effect of online sales, total non-food sales fell by 2.4 per cent over May 2014 – the deepest decline since the Scottish Retail Consortium began measuring the online effect in December 2012.

Three-month average total non-food sales decreased 0.2 per cent (online adjusted) in Scotland against a growth of 2.8 per cent in the UK, a 0.5 percentage point widening of the gap seen last month

The slump is clearly evident in clothing & footwear, driven by cooler weather compared to the UK.

There were certainly no queues forming for summer dresses and skimpy beachwear. In Edinburgh it was a case of fur coats – and an extra pair of woolly knickers.

Said David Lonsdale, Director of the SRC, “Better performances reported for beauty products such as cosmetics and skincare and for larger household furniture items simply weren’t enough to stem the steepest decline in the non-food category since 2012.”

“Lower prices in shops and at the petrol pump and a more optimistic outlook for jobs and wages growth have yet to translate into increased consumer spending at shop tills. Retailers will be looking to the Chancellor in his upcoming Summer Budget for measures to help consumer spending take wing.”

David McCorquodale, head of retail at KPMG, said, “Chilly winds blew up Scottish High Streets in May. There will be fingers crossed in the fashion trade for some sustained summer weather throughout June to boost sales before the holiday season, rather than be forced into heavy discounting.

“Outdoor living and DIY also suffered with the cooler weather and it was left to home furnishings and health and beauty to show resilience and growth.  With the whole of the UK showing continuous growth in non-food sales, retailers will be keen to see Scottish consumers have the confidence to catch up and narrow the gap.”

Nor do online sales provide much comfort. The retail industry’s figures suggest that online sales added 1.4 percentage points to the total growth of all UK non-food sales in May.  When adjusting for this effect, total non-food sales would still have fallen by 2.4 per cent (rounded) in May – the worst online adjusted performance since online records began in December 2012.

And compared with the UK total non-food sales over the past three months would have declined 0.2 per cent in Scotland against 2.8 per cent growth for the UK, a 0.5 percentage point widening of the gap seen in April.

Other Non-Food remained at second place in the growth rankings table for the fourth month running. Outdoor Living and DIY slowed due to the weather.

Warmer weather can’t come soon enough.

 

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