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Consumer confidence has failed to find pre-Brexit vote levels says John Lewis boss

Published 06/09/2016

John Lewis is opening new distribution centres
John Lewis is opening new distribution centres

The managing director of John Lewis has said that consumer confidence has failed to bounce back to pre-referendum levels, despite positive retail sales data since the vote.

"The original, immediate post-Brexit consumer confidence indices took an enormous fall, and everyone talked about the biggest fall ever. And actually, consumer confidence has not rebuilt to where it was," Andy Street told the Press Association.

Figures released in July revealed a sense of consumer resilience, with UK retail sales growing by 1.4% and beating expectations. It marked a rebound from June, when retail sales suffered their sharpest fall in six months.

Mr Street stressed that any conclusion regarding fallout from the EU referendum is still premature.

"Normally I'm very clear cut about it but the signals are actually extremely mixed, Retail sales were relatively robust in July so, I'd describe them as almost contradictory signs at the moment," Mr Street said.

Consumer confidence saw its biggest drop in more than 20 years in the wake of the Brexit vote, with around 60% of consumers expecting the UK's general economic situation to worsen over the following 12 months, according to post-referendum GfK Consumer Confidence Barometer survey released in July.

But GfK's August survey subsequently revealed that consumers were settling into a "wait and see reality". The outlook for the general economic situation over the next 12 months saw an 11-point jump, marking a turnaround from July's 19-point fall, but it was still 25 points lower year-on-year.

"I think it's very very difficult to discern a pattern yet," Mr Street said.

He noted that big ticket purchases like furniture - which "fell through the floor" during the financial crisis - managed to hold up in the wake of the referendum.

"So one thing I'll be absolutely clear on: those people who want to conclude the effects of Brexit so far are definitely premature. We really are only in the very, very early days of this playing out," he added.

John Lewis earlier this summer warned that the plunge in sterling could become a problem for the retailer, and while the firm is "fully hedged" against currency fluctuations for 2016-17, it could become an issue next year.

Sterling has fallen by about 11% against the US dollar and about 9% against the euro since the referendum result was announced in June.

Mr Street said that at sterling's current rates, John Lewis is likely to see a input price inflation next year, though the effect on consumer prices "is as yet unknown".

He said that is partly due to John Lewis's price-match policy.

"Given our commitment to never being knowingly undersold, we have to respond to the market in terms of how we're able to pass that on," Mr Street said.

The long-standing retail boss refused to be drawn on questions regarding his potential candidacy for West Midlands' mayor.

It comes amid months of speculation over Mr Street's political debut as a Conservative party candidate in the election next May, and the potential end to his near nine-year tenure as the retailer's MD.

Mr Street's comments came alongside the department store chain's announcement that it has opened two new distribution centres in Milton Keynes, creating 500 jobs, in a bid to keep up with online sales and delivery demands.

The £150 million expansion of John Lewis's Magna Park campus is part of the company's five-year, £500 million investment plan, £250 million of which has been earmarked for distribution.

The company now lays claim to one of the largest distribution centres in Europe, with Magna Park now extending 2.4 million square feet.

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