UK retail sales have continued their steady decline as price pressures weigh on already-stretched consumers, according to new data.
The CBI’s monitor for annual retail sales was little changed at -32 in August, from -34 in July.
“Weak demand and higher labour costs continue to put pressure on margins, dampening sentiment across the retail and wider distribution sector,” Martin Sartorius, principal economist at the CBI, said.
“This downbeat outlook is reflected in firms’ plans to scale back investment and hiring,” he added.
One in ten retail jobs is at risk in the next three years, according to the British Retail Consortium.
The downturn in UK retail has been driven by a combination of high interest rates, cost inflation and low consumer demand, with the latter placing particular strain on UK businesses, according to the latest Weil European Distress Index (WEDI).
Think tanks and lobby groups alike have described the situation as a ‘permacrisis‘ for retail, as low spending compounds structural changes, such as the shift to online shopping.
The CBI found that sentiment among retailers remains poor, with 10 per cent expecting their business situation to deteriorate in the coming quarter, with selling prices rising at their fastest rate since November 2023.
Government decisions ‘continue to bite’
Sartorius said that the government must prioritise building business confidence after a tax hike shook retailers at last year’s Autumn budget.
“The government’s fiscal decisions are continuing to bite, and retailers’ struggles send a clear signal: business cannot be asked to balance the books again at the Autumn Budget,” he said.
“Building business confidence through delivery must be the priority — starting with a rethink of the Employment Rights Bill, which risks piling on unnecessary costs and holding back jobs and investment.”
Last week, a group of retail giants issued a direct warning to Chancellor Rachel Reeves, arguing that her government’s tax policies could undermine its key promise to raise living standards.
The retailers claim they are being forced to raise prices in the face of mounting costs, and that additional taxes will exacerbate food price inflation, which is already climbing.