Are British Shoppers Relaxing Into A Crisis?

Photo: MATTHEW CHATTLE/REX/SHUTTERSTOCK

Conventional wisdom in the world of retail says that when political or economic conditions are uncertain, takings are low. Consumers lose confidence in the market when they don’t know if they’re about to experience a change in government, and so they tend to stop spending on non-essential items until the election they’re facing is over and done. When there’s talk that a spike in the interest rates applicable to the average credit card, loan, or mortgage are about to increase, people usually hold on to their money until they can spend it with confidence.

In the United Kingdom, political and economic conditions have been uncertain for more than three years. The value of the pound has risen and fallen several times during that period as the probability of leaving the European Union without a new trade arrangement came closer or moved further away, and there have been no less than three Prime Ministers since the referendum on membership of the European Union was called. Now, the country is a month away from a third General Election in four years.

Photo: SHUTTERSTOCK

If the combination of Brexit hanging over the country's head and the furor of an election weren't enough to contend with, there isn't even much certainty about what the result of the election might look like. A pound spent betting on the outcome of the election would be no safer than a pound spent betting on website like Late Casino. For a lot of people in the country, the odds of a mobile slots game delivering a result they might be happy with are greater than the odds of the election doing the same thing. Furthermore, one might even look to sports betting such as what sportsbettingday.com offers at the moment.

When you take into account all of the above, you would expect that if the normal rules were applied, the picture for retail in the UK in the run-up to Christmas - traditionally the biggest time of year - would be a gloomy one. The headline news coming out of the country certainly seems to confirm that. Mothercare, a mother-and-child store which has traded for decades and once had a strong high street presence across the country, has just collapsed. Operations have ceased immediately, and nearly three thousand retail jobs have been lost. There’s no way to paint that as good news, and it isn’t.

If you look away from the isolated case of Mothercare, though, the picture may be rosier than you'd expect to see. It's sad that Mothercare has gone, but the suspicion among retail experts is in the country is that it was more of a victim of falling behind the times than a victim of poor trading conditions. Several large department stores had replicated what was once Mothercare's USP, and beaten it for price. It had been losing money for a long time and has now bowed to the inevitable. It's not a representative picture of the UK retail situation as a whole.

Almost amazingly, the most recent figures available confirm that British shoppers spent more money in October 2019 than they did during October 2018, despite the fact that the Brexit picture is largely unchanged since that time, and there was no election pending this time last year. Everything we know about retail tells us that the figure should have gone down, but somehow the British High Street has managed to buck the trend.

The rise isn't huge, but it's significant. The total value of all sales is up by 0.6 percent compared to the same month last year, but it's the first rise since April of this year. Perhaps even more significantly, it's considerably higher than the growth figure for the year as a whole, which is a mere 0.1%. It's almost as if British shoppers have greeted the news of the forthcoming election with a decision to go out and spend as much as possible. Some analysts are wondering whether that could be true - Brits are simply weary of holding back and waiting, and having received confirmation of yet another Brexit delay and yet another election, they've decided to resume their original spending habits in the assumption that the crisis will go on forever.

In psychological terms, this is known as ‘relaxing into a crisis.’ It occurs when a crisis situation has been going on for such a protracted length of time that it becomes the new norm, and is no longer responded to in normal crisis terms. People accept the crisis as part of their day to day life, and so they deal with it calmly. Britain has had three years of clashing financial forecasts and rudderless leadership. Based on their sudden decision to increase their spending, its citizens have either started investing in doomsday survival packs, or they’ve given up hope of anything resolving itself in the foreseeable future.

There are a few wrinkles which we should mention before we suggest that this theory could be applied to the global retail picture. The first is that fuel prices have dipped slightly in the UK compared to this time last year, which in theory gives people more money to spend on non-essential items. The second is that within that 0.6% rise, there's a sharp increase in the amount of money being spent on takeaway food, which is up more than 6%. It's possible that Brits are only spending more because they have more to spend, and it's also possible that the retail food industry is the only significant beneficiary of that increase in spending.

Further analysis of the figures is required, and so are November's trading figures. If at the end of this month, there's another rise in spending, we'll be able to talk with more confidence about a definite upturn in the British retail services picture. Should that be the case, we may all have learned something about how shoppers respond to uncertain economic climates. They don't necessarily need a change in the way that retailers approach them; they just need time to adjust to the situation before they begin spending again.