British businesses brace for darker days as shoppers run out of cash

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Businesses and investors are ready for a business slowdown as shoppers run out of “borrowed time and borrowed money”.

Families have continued to shop since the referendum, driving up sales among retailers and supermarkets already taking advantage from a windfall made by the pound’s devaluation.

The latest group of companies to announce their year-end returns show pre-tax profits have hit their biggest point since 2012 as purchases in the year to April soared, according to a study of the UK’s top 350 listed companies.

The research, conducted by Share Centre, reveals that the proportion of sectors with rising incomes compared to those with declines was the largest on record, with just one in 20 firms publishing a loss for the year to March 31 compared with one in nine in the past two years.

While the weakness in pound only played a role in a small portion of that rise, implying the surge came from “real demand, rather than just from exchange rate factors”, the study cautioned of darker days ahead.

“Even those that performed extremely well may not continue to do so,” it said in its conclusion. “Since the beginning of the year, the economy has slowed markedly, sparking a succession of profit warnings. The UK is now the worst performing economy in Europe.”

“Since the beginning of the year, the economy has slowed markedly, sparking a succession of profit warnings. The UK is now the worst performing economy in Europe.”

“The consumer has been living on borrowed time and borrowed money,” it stated, saying that retailers were beginning to show worries and issue profit signals. “As the devaluation-induced spike in prices has bitten deep into household incomes, so consumer confidence and spending power have ebbed away.”

As economies develop elsewhere, it said that those with operations abroad are “likely to do better than those dependent on domestic demand”.

The forecast for UK-focused firms follows new warnings over consumer spending, with the Bank of England stating that credit card balances, outstanding car loans, and personal loans are far outpacing income growth.