British economic growth 'grinding to a halt' while DFS Furniture sees orders slowing

DFS shares fell at one stage by 16% in London trade, as shares of other UK homeware and DIY retailers also declined.

British economic growth is grinding to a halt as the cost of the living crisis escalates, a leading business lobby has warned, while UK furniture retailer DFS said orders are slowing.                   

The British Chambers of Commerce predicted output will be barely higher in the fourth quarter than it was at the end of 2021, with consumers and businesses set to rein in spending as taxes climb and inflation rises toward 10%. 

“Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing, with continued inflationary pressures and sluggish growth,” said Alex Veitch, director of policy at the BCC, which represents tens of thousands of firms that together employ six million people.

The BCC said it sees the economy stagnating in the second and third quarters, and contracting slightly in the final three months of the year. For 2023 as a whole, GDP in Britain will grow just 0.6%, it said.

The grim outlook will add to fears that the UK is at risk of falling into recession as soaring prices eat into living standards for households. UK inflation hit a 40-year high of 9% in April and is expected to peak in October. 

The forecasts are more downbeat than the average. On balance, economists expected growth to resume in the second half following a stagnant second quarter.

The BCC said consumer spending and business investment are set to grow less this year than previously forecast, and barely expand at all in 2023. Mr Veitch said the downgrade to corporate spending was “especially concerning” and urged the British government to take urgent action to incentivize investment.

Meanwhile, DFS Furniture has said that order volumes are falling as shoppers put off large purchases amid a UK cost-of-living crisis.

The UK-based company said customers have been placing fewer orders since April and that the slowdown, coupled with ongoing supply chain problems, led to lower-than-expected volumes in the fiscal fourth quarter. The shares fell at one stage by 16% in London trade, as shares of other UK homeware and DIY retailers also declined.

“The slower last couple of months of trading in most big-ticket sectors has caught up with the sofa market leader, DFS,” Peel Hunt analysts led by Jonathan Pritchard wrote in a note. The UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting a reduction in transactions in April. 

Separately, British online electricals retailer AO World will close its business in Germany. Having launched a strategic review of the business in January, AO concluded closure was the best course of action. 

"This decision was based on the continuing deterioration in the outlook for the German business, as well as the board's responsibilities to shareholders and other stakeholders," AO said. 

Bloomberg and Reuters