Retail sales fell 1.1 per cent in October, following a 0.7 per cent rise last month, in a “disappointing” start to the all-important festive season ahead of the budget next week.
Sales in clothing were particularly affected as shoppers took a more cautious approach, with spending “constrained by consumer nervousness amid mixed messaging from a Chancellor still weighing up her fiscal headroom,” Erin Brookes, European Retail and Consumer Lead at Alvarez & Marsal, said.
The late November budget, as well as talk of income tax rises, has dented consumer confidence this Autumn.
The GfK consumer confidence barometer has shown the overall index falling to -19 in November, with Brits less hopeful about their personal finances improving in the next year.
This is bad news for retailers, who have been looking to the festive period as respite from a turbulent time; the sector has lost 10 per cent of its jobs in the last 10 years and is expected to lose another 10 per cent by 2028.
Oliver Vernon-Harcourt, head of retail at Deloitte, said the results were “dissappointing for the sector during the first month of the Golden Quarter”.
“Consumers held off on making purchases ahead of Black Friday discounting, while unseasonably mild weather delayed purchases of winter goods,” she added.
Inflation provides some hope
Inflation fell in November for the first time since March, which, coupled with the a continuing reduction in the interest rate, should provide a boost for retailers in the coming months.
“There are hopes that consumers may be encouraged to spend in the run up to Christmas,” Vernon-Harcourt said. “With Black Friday on the horizon, and some of the busiest shopping days of the year fast approaching, retailers will be hoping for a positive end to 2025.”
Dr Kris Hamer, director of insight at the British Retail Consortium, added that shops “hope that Black Friday and the run up to Christmas will provide an uplift to sales”.
However, the budget presents containing uncertainty for both retailer and consumers, particularly after last year’s surprise increase to employer’s national insurance contrubutions (NICs).
With the budget next Wednesday – just days before Black Friday – it falls at a make-or-break date for the sector and risks “denting consumer sentiment at the most critical point in the trading calendar,” Brookes said.