Some like it hot — but UK heatwave proves a mixed blessing

The hottest July on record has been a mixed blessing for Charlie Bird, director of sales at Rossi Ice Cream in Southend-on-Sea. The heatwave has boosted revenues, but played havoc with his freezers.

A combination of hot air and low water pressure blew out a freezer component earlier this week at the business started by Italian immigrants in 1932, leading to a race against time to fix it before the ice cream melted. Now Rossi has shifted production to the evening so the equipment can better keep up with demand.

“You have to make hay when the sun shines,” Mr Bird said.

The heatwave may be boosting Rossi’s bottom line but it is having a mixed effect on the wider economy as spending and working patterns shift. The streets of Southend, a seaside town east of london, offer a snapshot of how this is affecting different sectors.

Spending shifts from fashion to food

Official measures of retail sales suggest the high street benefited from a combination of the heatwave, the World Cup and the Royal Wedding during the second quarter of 2018. But as these events have provided an alternative to spending the weekend shopping, non-food retail sales — such as fashion — fell in June.

The impact can be seen at John Lewis, the department store and supermarket group, which provides weekly performance updates. At its groceries brand Waitrose,barbecue meat sales were up by 40 per cent last week compared with the same week last year; sales of ice were up by 130 per cent.

But sales of home furnishings in the department stores were down by 6.3 per cent compared with the same week in 2017.

Charlie Bird: ‘You have to make hay when the sun shines’

Typically shoppers get their summer wardrobes and head out to garden centres when the sun emerges, said Andrew Wharton, a senior statistician working on economic growth at the Office for National Statistics. Then people shift away from the high street, petrol sales go up and people head to the beach and beer gardens.

The “displacement from the high street into catering” is a normal summer pattern but the recent heatwave has condensed this pattern over the past three months, he said. “Usually it’s a more gradual process.”

On a baking hot afternoon in July, Royals Shopping Centre, near the centre of Southend, bears out the data. The air-conditioned halls are empty compared with the bustle outside as Londoners arrive at the station and head for the beach.

The heat is also putting people off walking Southend’s pier — the longest in the world at 1.33 miles, according to the woman who runs the ticket office. But the bar outside the pier’s Royal Pavilion is doing a brisk trade as visitors cool off with a beer.

‘Staycations’ expected to boost economy

The warm weather could also change holiday spending. Those who haven’t already booked trips abroad may decide to stay in the UK, and others will have gone on spontaneous day trips, said Howard Archer, chief economic adviser to the EY Item club.

These “staycations” should give a net boost to the UK economy and its trade balance, unlike when consumers simply opt for, say, pubs over shopping centres.

But economists warn that without wage growth any overall boost to the economy could come from households dipping further into savings and lead to cutbacks in winter.

“It may be boosting the economy but is it borrowing growth from further out?” Mr Archer asked.

Farmers forced to dip into their savings

Economists fret that if the summer sun unleashes a wave of spending, it will lead to a further drop in saving or a squeeze on consumption later in the year.

Last year, British households became net borrowers for the first time since 1988, according to the ONS, as prices rose faster than wages. On average each household spent £900 more than it earned in 2017, borrowing a total of £25bn

“At the end of the day, the fundamentals for consumers haven’t changed at all,” Mr Archer said.

In the countryside around Southend, farmers are also borrowing. With the fields yellowing and the grass scorched, dairy farmers are having to “dip into feed supplies”, said Anand Dossa, an economist with the National Farmers Union.

These supplies are normally kept for the winter months and while there has been no impact on milk production yet, it’s “likely to come under pressure in the rest of the year”, Mr Dossa said. That means farmers, like shoppers, may have to borrow even more to make it through the winter.

“The financial impact [of the heatwave] will be with us for quite some time,” he said.


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