U.K. Consumers Curb Spending in June After Vote to Leave EU

LONDON—Consumers appear to be reining in shopping trips following Britain's June 23 vote to leave the European Union, reacting to the flagging pound and worries about economic stability.

So-called footfall—or shopper visits—in the U.K. in June dropped by 2.8% from a year earlier, the sharpest decline in more than two years, according to data released Monday by the British Retail Consortium and retail research firm Springboard. That compares with a 0.3% rise in May from a year earlier.

"The results are shaped by a political and economic storm against a backdrop of rain downpours and generally inclement weather throughout the whole month," said Diane Wehrle, marketing and insights director at Springboard.

While footfall climbed by 0.4% in the first week of June, it fell by 4.6% during the week of the EU referendum, and declined by 3.4% in the weeks following despite summer sales by retailers. Ms. Wehrle said cooler, rainier weather likely explained part of the drop but at least some stemmed from weaker consumer confidence after the referendum.

The declines were broad-based, with footfall dropping 2.3% at enclosed malls, 1% in outdoor shopping centers and 3.7% on Britain's high streets—the colloquial term for major shopping arteries here. The last time all three locations reported a decline was in December 2013.

Greater London, Scotland and the West Midlands saw the sharpest footfall declines, reflecting that any consumer fallout from Brexit is spread between both "remain" and "leave" camps. London and Scotland were strongly in favor of Britain remaining in the EU while the West Midlands reported the highest share of votes for Britain to exit the bloc.

Also on Monday, commercial real-estate company British Land Co. reported flat retail footfall for the first quarter, with retailer sales up 0.2%. Chief Executive Chris Grigg said it was "too early to properly assess the impact of the referendum result on the markets in which we operate, but we do expect some occupiers and investors to take a more cautious approach."

British retailers have so far shied away from quantifying the impact of Brexit on footfall and spending. Department-store chain Marks & Spencer Group PLC earlier this month said consumer confidence had "weakened in the run up to the EU referendum" but said it was "too early to quantify the implications of Brexit."

Still, Brexit is likely to hurt Britain's retailers as rattled consumer confidence translates into less discretionary spending. Additionally, sourcing costs for many retailers are incurred in dollars, which will pressure margins once hedging effects wear off given the slide of the pound against the U.S. dollar.

Halfords Group PLC—which sells car parts, bicycles and camping equipment—last week said for every five cents the dollar strengthens against the pound over the exchange rate the company had baked into its plans, Halfords's pretax profit will fall by £ 3 million.

The FTSE 350 retail index—which consists of 29 retailers—is down 10% so far this year, compared with a 5.4% rise in the overall FTSE 350.

Most retailers' results for the quarter include only a few days after June 23, but recent data is pointing to early signs that consumers are curtailing spending. Visa Inc. last week reported a 0.9% increase in U.K. consumer spending in June from a year earlier, making the second quarter the weakest for spending since the first quarter of 2014.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

July 18, 2016 08:45 ET (12:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.