UK retail sales saw an uplift in July, but rising operational costs, inflation, and economic uncertainty threaten to overshadow the gains, according to the latest figures from the British Retail Consortium (BRC) and KPMG.
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Total retail sales rose by 2.5% year-on-year, outperforming July 2024's 0.5% growth and exceeding the 12-month average of 1.9%. Food sales climbed 3.9% against 3.3% last year, while non-food sales rose 1.4% after a 1.8% decline in July 2024. In-store non-food sales improved by 1.9%, reversing a 3% drop the previous year, but online non-food sales grew by just 0.3%, below the 12-month average of 1.9%. Online penetration for non-food purchases fell to 34.8%, down from 35.1% in July 2024.
Helen Dickinson, Chief Executive of the BRC, said:
'Food sales did well in early July thanks to warm weather and a packed sporting schedule, though this momentum failed to hold for the rest of the month. Rising food inflation meant increased spending was more a result of higher prices than improved demand. Fashion sold well early in the month, but deteriorated as weather worsened, while homeware and indoor furniture grew steadily, recovering from the previous year's decline. Gaming and toys sold particularly well, as nostalgic adults purchased products like Lego.
With sales growth at these levels, it is barely touching the sides of covering the £7bn new costs imposed on retailers at the last Budget. If the upcoming Autumn Budget sees more taxes levied on retailers' shoulders many will be forced to make difficult choices about the future of shops and jobs, and ongoing pressure would push prices higher. Ultimately, this means more families struggling, particularly those on lower incomes, reduced consumer spending and a drag on economic growth.'
Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG, added:
'The UK's fifth warmest July on Met Office record brought a boost to home appliance and food and drink sales. But rising inflation was also a driver of the latter and monthly non-food sales are only growing at around 1% on average at present. With employment costs having risen and inflation both a business and consumer side pressure, it remains a challenging trading environment for many retailers.
While the majority of consumers that KPMG surveys are confident in their ability to balance their monthly household budgets, big ticket purchases are more considered in the context of rising essential costs and ongoing caution about the economy and labour market. Holidays are the priority for many this summer but those heading away have had to account for a higher cost of travel. Consequently, spending in some areas of the retail sector remains subdued and competition for consumer spend will remain fierce.'
While July's figures mark a clear improvement over last year, the sector faces sustained pressure from rising costs and shifting consumer priorities, leaving the future of many shops and jobs in the balance.
More information:
British Retail Consortium (BRC)
[email protected]
www.brc.org.uk
