High street sales grew in January but the gains failed to offset volume losses last year, leading analysts to warn of closures as costs mount.
Total retail sales in discretionary spend categories grew by 7.1 per cent in January, although this comes off the back of a 0.8 per cent drop last January, according to BDO’s latest High Street Sales Tracker.
Growth was primarily due to online sales, which grew 15.5 per cent compared to the same period the previous year.
Sales in bricks and mortar stores grew by 3.2 per cent, after a drop of 4.2 per cent last year.
“[Sales] serve as a stark reminder that high street retail is struggling to recover from the trends experienced in 2024… These results indicate a large drop in volumes over the past two years,” BDO said.
Sophie Michael, head of retail and wholesale at BDO, said the sector has been challenged “for some time” by high costs.
Costs are set to rise again this year as higher national insurance contributions (NICs) and higher business rates come into effect.
“In low-margin, highly competitive markets, there’s limited room to absorb higher costs – instead they’ll ultimately need to be passed on through higher prices, or cutbacks made to jobs,” associate director at Frontier Economics, Tim Black, said.
“The big question is how consumers will respond to higher prices,” he added.
“Thin margins will be under even more pressure… Retailers need to find a way to balance the increased cost of doing business while investing in product development, customer service and underlying technology, like AI, that will maintain their competitiveness,” Michael said.
“The sector already saw a high number of job losses in 2024 and retail store closures; with the oncoming cost increases, these numbers are unlikely to ease in 2025,” she added.
The body said this was in part due to cost rises – now and historically – and in part due to a general shift away from shopping towards experiential leisure.