UK retail sales show modest growth amid economic uncertainty

Retail sales in the UK demonstrated a tepid recovery in July, with total sales increasing by 0.5 percent year-on-year, according to the latest figures from the British Retail Consortium (BRC). This growth, while modest, surpassed the three-month average of 0.3 percent but fell short of the 12-month average of 1.4 percent.

The food sector emerged as a bright spot, with sales rising 2.6 percent over the three months to July, albeit at a slower pace compared to the 8.4 percent growth recorded in July 2023. Conversely, non-food sales, which covers fashion, continued to struggle, declining by 1.7 percent over the same period, a steeper drop than the 0.5 percent decrease seen a year earlier.

Helen Dickinson OBE, Chief Executive of the BRC, attributed the uptick to increased food purchases and a late surge in summer-related items. "The late arrival of British sunshine led to a better month for summer clothing and health & beauty products," she noted. However, this came at the expense of indoor goods such as furniture and household appliances.

The online non-food sector showed signs of stabilisation, with a 0.3 percent year-on-year increase in July, a marked improvement from the 6.9 percent decline in the previous year. The online penetration rate for non-food items rose to 35.5 percent, up from 34.9 percent in July 2023, though still below the 12-month average of 36.3 percent.

Deann Evans, EMEA Managing Director at Shopify, commented: “UK retail sales enjoyed a bump in July, signalling that retail is starting to recover after a difficult start to the year. Although retail sales haven’t come roaring back as the industry would have hoped, retailers should be confident of a strong end to summer trading now that warmer weather has finally arrived, as rain and lower temperatures dampened spending in June.

“The Olympics starting was a key retail sales moment, marking a summer of sport which has seen an increase in sports equipment sales on Shopify. Another possible cause of rising retail sales may be from parents getting ahead with their back-to-school shopping as school uniforms (+143 percent) also saw a significant increase.

Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG, cautioned that the growth might be less than retailers had hoped for during this crucial period. She highlighted the impact of televised sporting events on sales of electronics but noted a lack of significant big-ticket purchases.

Looking ahead, retailers are keenly anticipating the Autumn Budget, hoping for relief from business rates increases under the new Labour government. The sector also awaits details on the promised reform of the business rates system, a key pledge in Labour's manifesto. As the UK navigates post-election economic policies and summer events like the Olympics, the retail sector remains cautiously optimistic, even if consumer spending remains constrained by factors such as mortgage and rent increases.