The British Retail Consortium (BRC) has cautioned that 2025 is shaping up to be a difficult year for the retail sector. According to data collected by BRC-Opinium between 10 and 13 December, consumer confidence in the economy has taken a sharp downturn, with expectations for the next three months dropping from -19 in November to -27 in December.
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While public sentiment regarding their personal financial situations remained steady at -3, there was a noticeable decline in expectations for personal retail spending. These fell from +3 in November to -3 in December, reflecting growing caution among consumers as they consider future spending habits.
Helen Dickinson, chief executive of the BRC, highlighted the widening disconnect between how people view the economy and their own financial stability. She stated: 'Public confidence in the state of the economy took a nosedive, falling 8 points to -27. This created a widening gap between expectations of the economy and of people's own finances, which remained unchanged.'
Dickinson noted that the decline in consumer spending intentions could spell trouble for retailers as they approach the New Year. 'The public's spending intentions – both in retail and beyond – dropped 6 points, with expectations of spending in nearly every retail category falling. If these expectations are realised, retailers could find themselves facing a New Year spending squeeze just as they unveil their January sales.'
Retailers are expected to encounter further pressure in 2025 due to £7 billion in additional costs stemming from the Government's latest Budget. With sales growth unlikely to keep pace with rising expenses, businesses may be forced to take difficult measures, such as increasing prices, reducing store footprints, or freezing recruitment efforts. Dickinson stressed the importance of business rates reform, urging the Government to ensure that no shop is burdened with higher rates than it already pays.
Adding to the sector's challenges, the Confederation of British Industry (CBI) released its latest Growth Indicator, showing that private sector firms anticipate a decline in activity over the three months leading to March. These expectations are the weakest in over two years, underscoring the broader economic malaise.
Alpesh Paleja, CBI interim deputy chief economist, echoed the sombre outlook. 'There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.'
Paleja also pointed to the continued impact of recent Budget measures, particularly the increase in employer National Insurance Contributions (NICs), which have compounded the challenges posed by an already subdued demand environment.
As retailers grapple with these headwinds, the combination of weak consumer confidence, escalating operational costs, and uncertain economic conditions suggests that 2025 will demand resilience and adaptability. Many businesses may need to rethink strategies and double down on cost efficiencies to navigate a challenging landscape and maintain competitiveness.
While the path ahead is fraught with difficulties, industry leaders and organisations like the BRC are calling for Government support to alleviate pressures and foster an environment where retailers can weather the storm and continue to serve consumers effectively.
Source: www.theretailbulletin.com