The higher cost of petrol and diesel in 2017 has had a far more significant impact than anyone realised and could be partly to blame for the problems experienced by many high street stores. Across the year, the price of petrol and diesel rose by an average of 9p a litre and the AA believe this has taken spare money out of people’s pockets that they could have used for discretionary spending such as shopping on the high street or eating out.
Rising prices and rising problems
According to figures, the pump value of petrol consumed last year was £19.85 billion compared to £18.77 billion in 2016. It is a rise of over one billion pounds that has come from consumer pockets. Interestingly, this is despite figures from HMRC showing that the demand for petrol in the UK fell last year from 17.10 billion litres in 2016 to 16.785 litres in 2017.
AA spokesman, Luke Bosdet, put it into perspective. A family car is typically filled up twice a month and has an annual consumption of around 1,200 litres a year. As petrol is 9p a litre more expensive than in 2016, this means it costs another £108 a year to fill up the car on top of the existing cost.
As a result, people have less money available to spend on other things. It also means they drive less and therefore are not visiting high street stores and out of town shopping locations as frequently, or don’t have as much money to spend when they do visit them.
High street problems
Problems on the high street are stark and hardly a week goes by without a company admitting they are struggling. Just this week we have seen Carpetright saying they will close stores, Moss Bros issuing profit warnings and DIY chain B&Q admitting their sales are falling.
Children’s specialist Mothercare are talking to bankers, and New Look clothing chain is closing stores around the UK. All this comes just weeks after Toys R Us and Maplin both announced their problems on the same day. And even big names aren’t immune from problems – House of Fraser owners announced this week that they are injecting £15 million into the store chain to help protect its future.
It isn’t just high street shops that are suffering from people having less spare cash in their pockets. The UK’s top 100 restaurant groups have seen a 64% decrease in profits in the last year as consumers look at where they can cut back and save money.
Several high-profile chains have announced they are closing restaurants or restructuring the business with an aim to save the company. Prezzo announced 94 branches would shut, while the owners of Café Rouge and Bella Italia reported an 18% increase in losses.
The AA study went on to say there are indicators that the UK might be reaching the tipping point regarding consumption levels of fossil fuels. Petrol consumption has been declining for some time, but previously, diesel made up the shortfall.
However, with the problems faced by the diesel side of the car industry, fewer people are turning to diesel vehicles. It means that there is less fossil fuel being used in total. Other events such as fuel protests, price shocks or industrial action have also had an impact on the petrol consumed. The rise of electric cars is another factor that has contributed to the decline in fossil fuel use.
Interestingly, UK traffic levels hit record highs for nine consecutive quarters into last year, even though demand for petrol and diesel was lower than in 2016.
Balancing the books
For many people, the growing cost of fuel, the increase in food prices and stagnant wages mean that every penny needs to be watched and this has a direct impact on the high street with people having less money to spend. While the supermarkets continue to bring in big profits, many other stores are fighting for their lives. With the cost of petrol possibly continuing to increase, the picture doesn’t look rosy for many other high street shops and restaurant chains.
What do you think about the cost of living? Do you find yourself spending less in the shops and eating out because of higher fuel costs or is it just everything is more expensive now? Let us know in the comments below.