Context: Brexit causing slump in consumer electronics spending

Analyst predicts drop in confidence will have impact on business space as prices start to rise and consumers cut back on unnecessary spending

Big-ticket electronic items such as laptops are the first thing consumers are cutting back on as confidence continues to slide post-Brexit, according to Context's latest figures.

This downturn in confidence could have wider implications for the health of the sector, as well as affecting the corporate side of IT sales, as retailers and resellers are forced to hold large product inventories due to price rises and continuing market uncertainty, the analyst warned.

According to Context's latest figures, 40 per cent of 1,000 people questioned said they would be spending less on electrical items in the next three months, with 30 per cent of those saying it was a bad time to make big-ticket purchases such as a TV, tablet or laptops.

The retail sector was actually looking positive in May, Context said, with electrical sales up 7.1 per cent year on year, but underlying problems such as a drop in footfall in both high street stores (-3.7 per cent), retail parks (minus one per cent) and shopping centres (-2.3 per cent) were still present.

However the Brexit vote has left the sector in a "precarious situation", the analyst said. Jonathan Wagstaff, UK country manager at Context, said retail and the country as a whole had been caught off guard by the vote to leave the EU.

"The survey has shown how customer confidence has dropped massively. However, there is a difference between age groups. The older generation that was more likely to vote Brexit was more confident in its outlook," he said.

"It has been an interesting few months for the channel, with distributors buying before prices went up and a potential scenario where resellers are overstocking as they want to hoover up stock before prices go up. However, the top vendors have already increased their prices."

To avoid being hit too hard, retailers need to focus on being more "omnichannel", Wagstaff said.

"They need to focus on the customer rather than making them drive to a certain store location, so a click-and-collect option might be beneficial, and of course they need to closely monitor their pricing strategy. A lot of resellers and distributors have increased their prices already - it has to happen and these increases will get passed on, which is not ideal at a time when confidence is already low."

And the effect will hit the commercial space and in particular public sector, he said. "Certainly, if you look at government, what was once a £100,000 budget is now a £110,000 cost [due to price rises] and that will have an effect on suppliers and procurement as budgets were already squeezed before Brexit.

"Some retailers have the capacity to weather the currency fluctuations, and the bigger distributors that buy in dollars will not be as hard hit, but there will be some interesting developments in the next few months," he said.