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Market Commentary

​​Weekly Retail & Leisure News - 26 May, 2015

UK inflation turns negative for the first time

The UK inflation rate has fallen into deflation in April for the first time on record; the biggest contribution to this fall was cheaper travel costs and the grocery price war. The Office for National Statistics (ONS) has announced this week that The Consumer Price Index (CPI), which is the main measure of inflation rates, fell 0.1% in the year to April 2015. Jon Neale Head of UK Research at JLL, comments on UK’s inflation rate turning negative for the first time on record: "Inflation's fall to a negative - 0.1% will continue to stoke the deflation fears that began when CPI started its recent downward trajectory. However, with wages starting to increase and consumer confidence strong, it is highly unlikely that CPI will remain at this level for a sustained period of time.”

In other news, Marks & Spencer announced full year sales of £10.3bn across the group. The statutory profit before tax was up 3.4% to £600m. This is the first rise in full-year profits since Marc Bolland took over the reins four years ago. UK sales were up 0.7% and LFLs down -0.1%. Tim Vallance, Head of JLL's UK Retail and Leisure team comments on the release of the profit figures from M&S: "A better integration of the physical and virtual retail worlds lies behind the profit rise for M&S. Investing in their online platform and store modernisation has paid dividends. In terms of property, M&S stores are very well located. This can't fail to help boost sales at a time when consumer confidence is rising.”

In addition, supermarket Asda’s performance took a further slide during the first quarter of the year with LFLs down 3.9%. The grocer continues to focus primarily on their everyday low prices (EDLP) strategy rather than engaging directly with the promotional strategy which is still largely engulfing its Big Four rivals. Asda has stated that at least half of its drop in LFLs was due to a fall in purchase volumes.

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