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Market Commentary

​Weekly Retail & Leisure News - 21 June, 2014

​UK Retail's erratic recovery continues, as Tesco's Chief Executive departs

​It has been announced this week that UK retail sales growth slowed in June to one of its weakest rates in three years, possibly a consumer response to fears of higher interest rates. The BRC said total retail spending in June was just 0.6% higher than a year before and on a LFL basis sales were down 0.8%. Consumer spending has been a major driver of the UK's unexpectedly strong economic recovery over the past year, but in May the Bank of England said it expected the rate of growth to fall slightly in the second half of 2014. As JLL previously commented the recovery will likely be erratic in nature; smooth growth is far from guaranteed. However, the BRC did note that Q2 total sales growth was robust overall, rising by 2.6%, the fastest growth rate for a calendar quarter since the third quarter of last year.

Further evidence of UK Retail's erratic recovery comes from one of the UK's largest retailers. Tesco has announced the departure of Philip Clarke from his role as Chief Executive and will be replaced by Dave Lewis, a senior Executive at Unilever. Tim Vallance, Head of UK Retail at JLL, commented: “The decision to hire a Chief Executive from outside the retail world is a bold but necessary move for Tesco. It is encouraging that Dave Lewis has been chosen for his expertise in change management, customer development and brand management. The question remains as to whether this has been left too late. The rise of discount retailers and the increasingly virtual world of retailing means that brand is no longer king and customers are particularly promiscuous when it comes to filling their grocery basket."

As shoppers continue to demand a more convenient offer in an increasingly digital world, it is unsurprising to see that Network Rail, which runs 19 of the UK's biggest stations, has increased its retail space by more than 20% to 600,000sq ft in the last two years. Network Rail plans to have 850,000sq ft of retail space by 2019, this is not including the 450,000sq ft Grand Central shopping centre and John Lewis department store being tacked on to Birmingham's New Street station, due to open next year. The need to provide real convenience and choice to consumers, as well as the importance of good connectivity to a retail place are among the themes discussed in JLL's Redefining Retail Places project.

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