Retail sales fall on Budget uncertainty before run-up to Christmas
Retail sales fell by almost one per cent last month as cash-strapped Brits held back big ticket purchases amid a cloud of Budget uncertainty.
The Office for National Statistics said this morning they dropped by 0.7 per cent in October, following a 0.1 per cent rise the previous month, which had been revised down from 0.3 per cent.
The figures come as another leading confidence survey, by GFK, found that consumer sentiment rose in November, which will come as a relief to businesses dependent on a good golden quarter to boost margins ahead of tax rises next year.
Earlier this week, inflation rose to 2.3 per cent, above the Bank of England’s target of two per cent. This helped to convince analysts that an interest rate cut before Christmas is not likely to happen. Meanwhile the level of government borrowing increased also, marking the second-highest October figure on record.
Brits may have been deterred from spending due to the Budget, after Rachel Reeves announced a massive £40bn tax raid. Included in this were changes to pensions, inheritance tax, the minimum wage, and employers’ national insurance.
The body said this was driven by a fall in non-food sales which were down as retailers said Budget uncertainty affected sales.
Sales volumes rose by 0.8 per cent in the three months to October, compared to the three months to July however.
The ONS sad non-food store sales, including department, clothing and household items, fell by 1.4 per cent, after a big rise of 2.3 per cent in September.
This was reportedly due to low consumer confidence and uncertainty linked to the Budget.
It said the biggest fall within non-food sales was clothing, which dropped by 3.1 per cent, while online sales fell across all sectors. The ONS said the amount spent online, known as “online spending values”, fell by 1.2 per cent, but rose by 5.0 per cent when compared with October last year.
ONS senior statistician Hannah Finselbach said: “Retail sales fell back in October following three months of growth. The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.
“However, when we look at the wider trend, retail sales are increasing across the three month and annual periods, although they remain below pre-pandemic levels.”
Not all bad news?
Despite the drop in retail sales, analysts were keen to stress the importance of a quiet October, and the forthcoming golden quarter.
The British Retail Consortium highlighted that sales were up 1.8 per cent by value, and 2.0 per cent by volume.
Kris Hamer, director of insight at the British Retail Consortium, said: “While October produced a positive start to the ‘golden quarter’, with year-on-year growth for the fourth month in a row, there was a monthly decline due to pre-Budget jitters from households. Fashion took the brunt of this hit, especially as the milder weather last month put off winter purchases.”
Meanwhile, electricals performed well as people continued to upgrade their tech with the latest models. Health and beauty had yet another strong month of sales growth, especially with the popularity of beauty advent calendars which went on sale.”
A warning to the government
“This additional revenue is essential as retailers face over £7bn of additional costs in 2025 alone, as changes to Employers’ National Insurance contributions, the increase in minimum wage, and new packaging taxes come into effect.
These changes will pile pressure onto an industry that already pays far more than its fair share in business taxes, and will make job losses and store closures inevitable.
To avoid a cliff edge of costs in April 2025, Government must reconsider the existing timelines for the new packaging levy, while ensuring any changes to business rates offer a meaningful reduction for all retailers as early as possible.
Oliver Vernon-Harcourt, head of retail at Deloitte, said: “After a few months of positive growth, October’s retail sales figures paint a more subdued picture, with Halloween festivities failing to continue the upwards sales trajectory.”
Mild and dry weather, paired with pre-Budget uncertainty, meant that consumers opted out of shopping for seasonal clothing and chose instead to rein back their spending in the run up to the biggest shopping months of the year.”
“With Black Friday on the horizon, and Christmas trade having started earlier than last year, there is some optimism that November’s sales will improve, particularly if bonfire night socialising provides an additional spark of spending.”
While sales of big ticket items continue to be low, the discounting period may be the much-needed boost for retailers looking to move stock and for those consumers who have been delaying more significant purchases.”