Sainsbury’s CEO has said Brits hit by the cost-of-living crisis are unlikely to resume strong spending until the new Labour government sets out its tax and spending plans, and interest rates fall further.
Simon Roberts told Reuters that even with falling inflation, rising wages, and strong employment rates, UK consumers are still nervous to buy larger items.
“Discretionary markets continue to be difficult,” Roberts said.
“Consumers inevitably are wanting to be clearer about what’s going to happen next and for that reason we see a continued caution in discretionary spending.”
The CEO said it was critical that the government come through on its promise to fundamentally reform business rates, noting Sainsbury’s pays almost as much tax on its properties as it makes in operating profit.
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Recent surveys show UK consumer confidence has plunged since Prime Minister Keir Starmer’s warnings about the economy and potential tax increases in the 30 October budget, raising concerns about trading conditions ahead of the key Christmas period.
Sainsbury’s has a more than 15% share of Britain’s grocery market, behind market leader Tesco, but a quarter of Sainsbury’s sales are from non-food products versus about 7% for Tesco, making it more vulnerable to a broader downturn.
“We need to see interest rates continue to come down because that directly impacts household spending. I think clarity in the budget, one way or another, is helpful,” said Roberts.
Despite the economic uncertainty, Roberts is confident the supermarket will deliver a strong Christmas.
“What we’ve seen over the last three or four years through the pandemic and the inflation crisis, Christmas has been a time when people in the end want to be together with their friends and family and loved ones.
“There’s absolutely no complacency at all in our business. We’ve had three strong Christmases and we’re preparing for a fourth one to come.”
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