World Cup hangover could hit Britain's high streets

Britain's high streets should expect to suffer a hangover as World Cup fever fades, economists said on Friday, noting that retail sales usually fall sharply as the tournament gets under way and England's on-pitch performance disappoints.

Official data this week have shown a remarkable run for sales with retail spending rising at the fastest pace in almost a decade as the economic recovery powers ahead, and the public finance figures showing a sharp increase in value added tax revenue.

But economists warned that a spending spree in the immediate build-up to the World Cup was usual and generally reversed when the figures for June were released.

Samuel Tombs, an economist at Capital Economics, said he could not relate the spending figures specifically to England's repeated disappointments on the pitch, but the timing of sales appeared to be significantly affected by the World Cup.

In the last six World Cup years, sales rose an average 0.7 per cent in May, then fell an average 1 per cent in June, he said. The one saving grace, he added, was that the pre-tournament surge and post-tournament slump appeared to have weakened over time. "Perhaps this is because people have become less interested in England's fortunes," Mr Tombs suggested.

An alternative reason as to why the World Cup might be less of a drag on future retail sales figures this year is the growth on online shopping and the timing of the matches in the evening, which does not compete so directly with high street shopping.

But the World Cup effect is likely to distort figures on spending for a few months, complicating efforts to assess the strength of the recovery. Official data on Thursday showed UK retail sales volumes over the three months to the end of May were 4.9 per cent higher than the same period a year ago - the biggest increase since November 2004.

On Friday, the public finance figures showed VAT receipts were 5.7 per cent higher in the first two months of this financial year, which started in April, than in the same period in 2013-14.

The Office for National Statistics said sales in sports shops were almost 30 per cent higher in May than a year ago as shoppers flocked to buy World Cup football shirts and other merchandise.

Waitrose, the upmarket supermarket, said beer sales were 50 per cent higher in the week to June 14 than a year earlier. Barbecue meat sales almost doubled, sales of prepacked salads were up more than a third and sales of prepacked rolls rose by more than a fifth.

John Lewis last week reported a sharp rise in television sales ahead of the World Cup, and Home Retail Group, which runs the Argos and Homebase chains, reported strong sales of replica Adidas "Brazuca" official tournament matchballs, and rising sales of barbecues.

This week's figures come as the Bank of England inched closer to raising interest rates for the first time in seven years. The Monetary Policy Committee signalled this week that it would take its cue from the way the economic data evolves over the coming months, prompting renewed speculation that the UK could see a rate rise before Christmas.

Retail sales volumes fell 0.5 per cent between April and May - in line with economists' expectations - but the smoother three-month growth rate remained high thanks to a 1 per cent surge in the previous month. "Looking through the monthly volatility in retail sales, the trend remains exceptionally strong," said Kevin Daly, an economist at Goldman Sachs.

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Total UK inflation fell this week to 1.5 per cent, the lowest in more than four years, helping to make incomes stretch further.

But if households find they have overdone premature celebration in the first days of the World Cup, the data will show a slow down over the summer.

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