Brexit uncertainty and a tough year mean that the focus for retailers will be on trading rather than IPOs and deals.

The fashion retail market has suffered in recent months.

PwC’s latest report on the sector highlighted that an average of 15 shops closed up and down high streets every day in the first half of the year.

Sales hit their lowest levels for seven years as the warmer autumn weather caused a dramatic slowdown in the performance of winter clothes, and fashion giant Next had a lower than expected return.

Ecommerce is certainly on a different trajectory, however. The latest ONS statistics demonstrated 22% year-on-year growth in online sales.

“UK consumer appetite has dropped because of the economic uncertainty, resulting in a reduction in sales for the high street”

While it is important to note that fashion retail remains 4% down on last year, larger household items such as furniture have delivered a 44% rise as consumers become more confident about online purchasing.

The relative growth of ecommerce against traditional retail can also be explained by the impacts of Brexit.

Online retail has particularly benefited from the weak pound, with boohoo.com’s expanding international sales base a core reason behind its strong growth figures over the past 12 months.

Conversely, UK consumer appetite has dropped because of the economic uncertainty, resulting in a reduction in sales for the high street.

Deal-making down

It is therefore unsurprising that we have seen a dip in deal-making activity.

Since the Brexit vote, there have been no public market listings. There have been only three IPOs in the past 12 months, raising a total of £194m.

In comparison, the previous year brought nearly double the volume and value of transactions, including the £221m flotation of DFS in June 2015.

“As key trading periods such as Black Friday and Christmas are on the horizon, many high-street retailers may see an opportunity to make up for lost sales in recent months”

Ongoing investor appetite has also continued to dissipate. In 2015 there were 11 fundraises worth £1bn, including high-profile placings for Pets at Home, Poundland, and Sports Direct.

This year has yielded less than half that, with 11 placings worth £379m.

With the continued uncertainty surrounding Brexit, it is likely that deal-making will remain subdued for the foreseeable future.

As key trading periods such as Black Friday and Christmas are on the horizon, many high-street retailers may see an opportunity to make up for lost sales in recent months.

The focus of many of companies will therefore be on optimising performance over the next few months, rather than looking at opportunities for an IPO or private-equity investment.

  • John Wilson is a research analyst at Zeus Capital