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Consumer spending hits an all-time low

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

“Consumers upbeat despite Brexit” came the headline just days before the retail data showed consumers are clearly anything but. However, at a time when uncertainty is the only certainty there’s always scope for optimism.

Consumer spending hits an all-time low

It’s a shame the pollsters weren’t right - especially for the businesses reliant on the UK’s consumers actually putting their hands in their pockets and spending - and not just voicing their inevitable Brexit ennui.

The latest figures from the British Retail Consortium though showed that July's hot weather failed to boost consumer spending in the UK. It instead fell to a new low.

Average retail sales over the year to July rose by 0.5%, with the "challenging retail environment" taking its toll on both the High Street and online. Even grocery sales, which normally rise when the sun is out, as people fire up the barbecue and spend on picnic goodies, were "lacklustre".

Sports Direct’s Mike Ashley may be remaining on the acquisition trail, but he’s having mixed results with his bargain basement buys.

His latest acquisition is UK fashion retailer Jack Wills which he got for £12.7 million, beating Edinburgh Woollen Mill Group to snap up the retailer which went into administration.

His Sports Direct group will acquire 100 Jack Wills stores in the UK and Ireland and take on 1,700 staff as part of the deal, but Ashley has already admitted that he regretted rescuing House of Fraser a year ago after discovering problems that it described as "nothing short of terminal" - and revealing that more House of Fraser stores will have to close.

Now Boohoo, the online fashion store, which has been going head-to-head with ASOS to attract the custom of fast-fashion devotees, is joining the hunt for bargains, buying Karen Millen and Coast, which have also fallen into the hands of administrators.

And, of course, the effect of the consumer slowdown doesn’t stop at the high street (actual or virtual) or at the out-of-town supermarket. The holiday industry has already felt the pinch as well; with package holiday firm Super Break and Late Rooms the latest casualties of the nation’s collective belt-tightening.

Let’s not forget the less visible casualties of the retail rout either. Shopping centre landlord Intu Properties has already spelled out its woes and seen falling footfall and the rise of CVAs (company voluntary arrangements) as a double blow to its bottom line.

Employees aren’t the only ones who feel the blow when retailers go into administration. Even when they’re rescued, the lifeline they’re thrown can be all too short and too many end up hitting the buffers any way.

From the outside looking in Mike Ashley might sound like a saviour when he says: "We will look to work with the landlords to reduce the rents to keep as many stores trading as possible," as he did when he snapped up Jack Wills. But the likes of Intu and other commercial landlords know what’s coming next and the downside suddenly becomes all theirs.

Of course, where there are losers there are always opportunities and this is the sort of environment that the contrarian investor comes into their own.

Spotting winners isn’t easy, but just as the likes of Joules, the quintessentially British clothing retailer that is bucking the trend and making strides overseas, peddling its colourful wellies and raincoats to consumers in nation’s less familiar with the traditional British gloom (meteorological or otherwise) opportunities are out there.

One such fund manager looking for these opportunities, whatever happens, is Ayesha Akbar, manager of Fidelity’s Select 50 Balanced Fund. Picking and choosing from Fidelity’s already specially-selected funds in the Select 50 list of preferred funds, she is running her fund of funds to generate growth despite of - and indeed out of - the certain uncertainties we face as investors; not just in the UK, but globally.

You can hear more about Ayesha’s strategy in our latest video interview.

More on the Select 50 Balanced Fund

Important information The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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