British retailers suffered a disappointing start to the sector’s all-important ‘golden quarter’, as pre-Autumn Budget jitters saw shoppers hold off on spending.
Retail sales volumes followed a 0.1 per cent rise in September with a 0.7 per cent drop in October, driven by a 3.1 per cent slump in clothing and footwear, and a 0.4 per cent dip in food, data from the Office for National Statistics showed on Friday.
Sales volumes were up 2.4 per cent year-on-year for the month, but remain 1.5 per cent below their pre-Covid level in February 2020.
Silvia Rindone, EY’s UK and Ireland retail lead, pinned the October decline on weak consumer confidence, driven by ‘uncertainty surrounding the Autumn Statement, rising energy bills, and the impending costs of Christmas’.
She added: ‘The next few months are a critical time for many retailers. The retail sector faces significant headwinds with upcoming changes to National Insurance and minimum wage increases.’
Many retail businesses have already warned the impact of higher labour costs, set to take effect in April 2025, will lead to higher prices and potential job cuts.
Retailers will hoping to bounce back ahead of the key festive trading period
They will be hoping to bounce back as Black Friday and the crucial festive shopping season loom.
Danni Hewson, AJ Bell’s head of financial analysis, said: ‘It could be that people were simply keeping their powder dry, saving their pennies for the late half-term or to indulge over Christmas.
‘It could also be that unseasonably mild weather simply delayed the purchase of winter woollies which have been needed over the past week.
‘But with retailers like JD Sports reigning back sales expectations for the year, the next crucial couple of months could prove incredibly tricky for the sector.’
Clothing and footwear sales lead the decline, while petrol proved the only outlier
Separate data on Friday could prove a silver lining for retailers, with evidence of easing consumer pessimism.
The GfK Consumer Confidence Index rose to -18 for November, up from -21 in October and well ahead of economist forecasts of a deterioration to -22.
Retail sales volumes remain depressed
Thomas Pugh, economist at RSM UK, said: ‘Looking ahead, retail sales should grow through 2025 as higher consumer incomes and rising consumer confidence… feed through into higher spending volumes.
‘What’s more, while headline inflation jumped from 1.7 per cent in September to 2.2 per cent in October, retail prices fell at an accelerated rate.
‘Indeed, retail inflation dropped from -1.3 to -1.6 per cent, meaning lower prices will help a rise in spending feed through into bigger increases in sales volumes.’
Consumer confidence improved this month
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