Basket & Barometer February 2026

 Diane Wehrle CEO at Rendle Intelligence and Insights joins Simon for their monthly chat

A cautious consumer shows up in January with fewer trips but bigger baskets, while retail parks gain and high streets hold on. We dig into youth unemployment, wage compression, AI’s impact on entry roles, and why productivity must carry the next phase of retail.

• January footfall near flat with retail parks up
• Sales values rise while transactions fall
• Food inflation props value; non-food softens
• High street sales close to parity year on year
• GfK confidence slips, savings tick up
• Youth unemployment at 16% drives concern
• Wage rises meet NI pressures and job cuts
• Pay bands compress between colleague and supervisor
• Housing sales drop chills discretionary categories
• Shift focus from process to experience

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Chapters

• 0:09 Setting The January Context
• 0:29 Footfall And Sales Headline Numbers
• 1:49 Category Winners And Laggards
• 3:37 Transactions Down, Baskets Up
• 3:44 Confidence Slips And Why It Matters
• 4:33 Youth Unemployment And Wage Floors
• 5:14 Automation, AI, And Entry-Level Work
• 6:35 Retail Job Cuts And Cost Pressures
• 7:52 Housing Market Chill And Spillovers
• 8:54 Where Households Cut Discretionary Spend
• 9:56 Rates, Savings, And Caution Dynamics
• 11:05 Pay Pressures And Sector Gaps
• 12:08 Collapsing Pay Bands And Productivity Stagnation
• 13:28 Time-With-Customers Vs Doing Stuff
• 15:22 Training For Value And Next Steps

Transcript

SPEAKER_00: 0:05

Welcome to the Productivity Podcast. This is our monthly Basket Barometer episode with Diane. Hi Diane, how are you doing?

SPEAKER_01: 0:12

I'm very well, Simon. How are you?

SPEAKER_00: 0:14

Good. I think you're all rested and relaxed and sunned from your holiday, aren't you?

SPEAKER_01: 0:18

Absolutely, but it's you know about two weeks now, so it feels like a long time ago. But back to the rain.

SPEAKER_00: 0:24

Good. So we have entered 2026. This is January 2026, we're going to look at. I suppose for reference, normally a tricky month, lots of sales clearly on the high street and stuff, but people battling down the hatches for over Christmas spend, paying off credit card bills, all that kind of stuff. So where where did we settle?

SPEAKER_01: 0:46

Well, January actually was much more positive than I envisaged it would be. I'm not saying it is positive, but it is better. So, in terms of footfall, firstly, so Sensomatic produced data on footfall into stores, and they recorded a decline, a very modest decline in January of 0.6%, which is okay. So we sort of talking parity with last January, but previously January before January 2025, footfall had gone up by 6.6%. So it had a strong comparable against which it had to compete. So that's that's not bad. That sort of that result really was driven by an increase in footfall in retail parks, whereas high street and shopping centre footfall declined. So stalled in those destinations had or less customers. The RC results were fairly positive. January was 2.7% increase in retail sales against January 2025. And in January 2025, we had increased by 2.6 versus 2024. So we'd seen this increase. Some of that, of course, is inflationary. Non-food the increase was only half that of food. So 1.7% increase versus 3.8% of food. And there is still a higher inflation going on in food. So that is a reflection of the inflation rate. Sales in high streets, according to Beauclair, is very illustrative. And actually, that also was fairly positive. Sales in January were just 0.7% below January 2025. And they had actually fallen in January 2025 by 2.5%. So keeping his head above water helped by food and drink and health and beauty, which food and drink saw a slight marginal increase of all the five sectors that account for 86% of sales in towns and cities. Food and drink were the only one of those five that saw an increase to 0.7%. And health and beauty decreases just by 0.4%. The largest decrease was in general retail, which is 3%. And that encompasses department stores. So a lot of fashion in there, but also some value retailers, such as home bargains, etc. So not too bad, but those results are predicated on a drop in customers and transactions, but an increase in average transaction value. So we are seeing this characteristic of fewer customers buying and those customers making fewer purchases, and with an increase in the actual the average transaction value. Part of that, of course, will be inflation, and part of it hopefully will be those who are able to spend money will be spending more money. So yeah, it's not too bad at all. I I felt fairly heartened by January. Having said that, and hopefully I'm not sticking on under here. I was waiting to speak with you because I wanted to grab the latest GFK consumer confidence results. And that's we're we're now at the end of February, where we're talking about January, and February results have just come out, and they've dropped from minus 16 index score in January to minus 19. So over the horizon, I think we're going to see some more caution coming through on the consumer side of things over through February.

SPEAKER_00: 4:01

We're nervous, don't you?

SPEAKER_01: 4:02

We're consumers are nervous. And actually, looking at the economic landscape, the economic, the wider economic indicators, you can you could sort of see why that is. You know, wage inflation has dipped, it's now around 3%, it was at over 4%, unemployment's high, all those things make a big difference about how people spend their money.

SPEAKER_00: 4:26

Yeah, unemployment interest now. I mean, I've got the figures here. So unemployment in the three months to December reached 1.9 million, 5.2%. And then there's a graph on the screen, but to kind of talk you through it, it's really interesting because a 16 to 24 year old bracket, 16% of people unemployed.

SPEAKER_01: 4:44

Yes, very high. Very high amongst young people.

SPEAKER_00: 4:47

Over 25, 3.6%, and then it kind of stops at about 3% between 35 to 49, 50 to 64 and 65 plus. And that 16 to 24 bracket's the interesting one because national minimum wage for those aged 18 to 20 increased by 16% in April 2025, and then it'll go again a further 8.5% in April of this year 26. So it's interesting that that bracket clearly has uh school leavers, college levers, some university levers, but is that population that have seen the biggest rate increase in the in that two-year period? So tough tough times if you're I suppose leaving college and and leaving union plays back into the whole hopefully apprenticeship thing and companies using the apprenticeship levy.

SPEAKER_01: 5:34

Absolutely. And I and I I do fear that this is this is a structural shift. This isn't just a temporal shift. You know, people you know, organisations are investing in automation and AI to offset the cost, the additional operating costs of increased living wage and national insurance. By investing now, and hopefully those sort of low-grade routine tasks that we perhaps we all did when we were grads will be a lot of those will be taken away by AI. And so, you know, looking along further, you know, further down the horizon, that that rate of unemployment for young people is quite you know, quite dangerous, really. It's a really a real challenge because those jobs are going to be taken out. And the the more the cust the organisations invest in AI, the better they become and more used to AI they become, the fewer unskilled or novice employees they will take on because they won't use them.

SPEAKER_00: 6:31

Yeah, and I I was at Euroshop this week in Germany speaking for for ITEL, and one of my points was that technology is going to manage the process in the future, and colleagues should manage the experience because that's really difficult, and I don't think you do you want to replace it. So it it's how that workforce moves into new roles. But just again looking at an article from the BRC you mentioned before, titled Staff Call on the Horizon for Retail due to rising costs, say the BRC. There's some really interesting facts in here. So of their CFO's finance directors interviewed, 61% plan to reduce staff hours and overtime in the next 12 months, 45% expected free recruitment, 55% looking to cut head office head count and then further and 42% considering reduction in store rolls. That's on the backbone of last year's 74,000 jobs going in retail, which is about the taking the retail employment to 2.76 million, the lowest ever on record, and over the past five years 250,000 roles have disappeared. So it's a really tricky backdrop to be operating in, which then really joining the dots plays through to your point around we're a bit nervous, that leads to people saving more, less people moving jobs. Uh I think there was some stats you had on house prices as well.

SPEAKER_01: 7:48

Yeah, I mean how house sales actually. So not talking just about house prices, but the number of sales of houses has dropped 5% between January and February, in January from December. So that's that was the first major drop since last summer. And that reflects back through to house prices. But you know, if people are scared for their job, which we see in the unemployment rate, you know, sitting at 5.2, as you say, younger unemployment rate is is even higher. You know, the minute if they're worried about losing their job or they then do lose their job, they are not going to be buying necessarily a new house. So they'll be staying where they are.

SPEAKER_00: 8:31

Which is interesting because the government, without getting political, are encouraging a load of new house building and have relapsed all the rules, haven't they? So it doesn't necessarily equate with uh trying to grow the the construction industry. And when when we get nervous and we start saving, which areas typically do we draw back on?

SPEAKER_01: 8:50

Oh well it's always discretionary spend, isn't it? I mean we still need to eat, so we'll continue to buy groceries. Um we may we may downgrade on those groceries, you know, may go more economic and you know, more basic, but we will still buy food. Um but you know, it's all those discretionary items. Fashion has always been very hard hit because it's actually a high price point a lot of it, and unless you shopping value fashion chains. But we've seen in January, you know, you know, it's gonna be health and beauty, it's gonna be hairdressers and gyms and nail bars and all those sorts of things that you are lovely to have, but we don't really need them to exist. I mean, also eating out, you know, food and drink, you know, it's it's expensive. It's you know, inflation has been i is hitting hard in that sector because overhead costs are enormous now. So, you know, where we you know, where we might eat out once or twice a month, we may eat out once every two months, you know, and do it in home. So all these areas are touched and they're all inextricably linked. And people often say to me, oh yes, but interest rates are going down, it's gonna be fine. But actually, that's a sort of that that indicator is divorced to many people's life in many ways.

SPEAKER_00: 10:03

Yeah.

SPEAKER_01: 10:04

For start, it doesn't really help savers because clearly the minute the interest rates drop, savings rates drop. So actually, older people have have less money coming through in their investments. But you know, if you're feeling nervous about your job, however low interest rates are, you're it's very unlikely you're going to give yourself a huge overhead with a new with an increased mortgage because although it's a low interest rate, it's still much more of an overhead to you as a household. And why would you take that risk? So, you know, I think we need to be a little bit cautious and try and join the dots on those economic indicators a little bit more and give ourselves this this rounded picture, which I hope we do during this recording.

SPEAKER_00: 10:40

Yeah, yeah, it's it's interesting when you start to piece it all together and the news never comes out joined up, does it? It's always relatively fragmented at different times of the month or when linked to an event, you know, God knows what, again, Donald Trump's gonna tank the economy with something else. There's a whole bunch of unplanned stuff or reactive stuff which can make a significant difference.

SPEAKER_01: 11:01

Absolutely, absolutely. And you know, they'll talk about you know wage increases, they've they dipped the they're at three percent, but they were at 4.6%, you know. And that's because employers have had to cut back, you know, and and that's still about inflation rate. So it's still level with inflation, but it's you know, it's not actually increasing your standards of living, it's just keeping you level.

SPEAKER_00: 11:25

And I think there's a there's also an implied pressure as well, because you do see some of the bigger supermarkets which clearly have fit the same challenge as everybody else, but just bigger power, they tend to go above so uh some of an extra five percent, some are at 4.6 pay rise. And I think that that puts a general pressure on everybody else in their arena to to kind of keep up. So there's a there's a bit of peer pressure as well that goes on when somebody announces a an overinflationary pay rise percentage.

SPEAKER_01: 11:53

Absolutely, and of course they lose staff and so they lose service and it you know it's difficult to recruit. But also, you know, even within the wage increase, there's differences, there's there's disparities. So in while it's overall wages rose by 3% in December, that's very different between the private sector and the public sector. So actually the public sector was seeing increases of 5.6% versus 2.6% in the private sector. So, you know, all those of us are employed by the pri in the private sector are not seeing as great a benefit as people in the public sector. So, you know, that has a disproportionate effect as well. So while some supermarkets are increasing their wages significantly, generally across the board, they're not going up. Actually, they're not even going up by inflation at the moment. So, you know, that makes people cautious. So of course, people are where they because they're feeling less confident, and GFK have captured this, you know, they're starting to sit tip downwards in in February. People are saving more. And if they're not if they're saving more, they're not sending it. You know, it's they're they're waiting for almost for the axe to fall, you know, they're worried about the job, they're not getting a pay wage increase, prices are going up all the time, so they're they're stashing it away as a as a buffer.

SPEAKER_00: 13:09

So we love a stat, and I'll finish on a stat just uh to to bring it all back around. So in 2020, the there was an average gap of about£8,000 between colleague rate and supervisory rate. From 2026, that gap will be about£2,100.

SPEAKER_01: 13:28

Wow.

SPEAKER_00: 13:29

So that hierarchy is really starting to collapse, convergence pay rates. That variance between colleague and supervisory is starting to vanish. So that we've talked about it on a number of podcasts, that upward pressure on supervisory rates that never gets talked about. It's all about the bottom line national living wage number. Is real and and that's where people really struggle. The getting the colleagues there, you've got to do it, is then how you treat everybody else. So Yeah, UK we're paying colleagues about forty percent more on national living wage than we did six years ago by April 1st this year. So that's huge, that's huge, right? Who it wouldn't take a forty percent pay rise. But I don't know if we're dealing with productivity rates. Well, I I kind of know the answer. We we're we're dealing with roughly the same productivity rates in 2026 as we were in kind of almost the late 90s, early 2000s, but the cost model's just absolutely ratted up.

SPEAKER_01: 14:24

Well, I mean, I think that's you can you've you've hit the nail on the head, so I think that is the problem. Productivity and output. You know, our GDP in this country is our GDP growth is shockingly bad. You know, we are not seeing that growth. And if we don't see that growth, you can't offset the cost increases that businesses are struggling with. So whilst the national living wage goes up, while NI goes up, you know, the the the employees who have jobs have better pay, there are fewer of them. So that is really very difficult.

SPEAKER_00: 14:54

So sneak a sneak preview. We've got our our first benchmarking report coming out in April of this year that we're we're working on, and one of the again, one of the stats I talked around this week at Euroshop was general retail over the last couple of years, they spend on average 26% of time with customers, 55% of the time doing stuff, um, and around 19% of the time non-value adding if you strict breaks out, that's about 14% of the time. So yeah, we don't we we still don't actually spend that much time with customers and almost as much time walking, waiting as as we do with them, but over half the time doing stuff, and that that's back to your point just to finish off of that's the stuff that's gonna get eroded by automation and AI.

SPEAKER_01: 15:36

Absolutely, and actually, you know, stuck in the shelves is important, of course it is, but actually upselling to your existing customers and increasing a conversion rate is more important. And if you're gonna pay your staff more, and they've you you quoted that you know they're being paid a huh a significant amount more than they were a few years ago, then realistically they should be trained better and doing more for that money. You know, it should be more efficient, more professional occupations, and hopefully yield greater productivity for for the for the organisation.

SPEAKER_00: 16:08

Well, I think that that's the plan. And I think all the all the easy stuff's done, and we're not whatever business you run, you won't be able to save your way out of this. So it's got to be about process productive working. And and we will pause on that note and come back next month to review February. Some interesting stuff will happen, I'm sure. But uh hopefully we we do see some of those green tubes as we head into spring, and hopefully it's stopped raining because that's been the consideration.

SPEAKER_01: 16:35

Yeah, I mean I've the last week or so it's good that the weather has improved, which is great. So let's just keep our fingers crossed. I hope that really plays into retail.

SPEAKER_00: 16:43

Brilliant. Thanks, Di. Appreciate it as always.

SPEAKER_01: 16:46

Thanks, Simon.