The retail sector experienced a decline in sales volumes in October, attributed to consumer uncertainty surrounding the upcoming Budget announcement. According to the Office for National Statistics, sales volumes dropped by 0.7% in contrast to a slight increase in September.
The data reveals a broader picture with a 0.8% increase in sales volumes for the three months leading to October compared to the preceding three months ending in July 2024. However, specific sectors like food stores saw a significant reduction, with volume sales decreasing by 0.6%. Despite this slump, the decline is an improvement over the 1.9% drop recorded in September.
The performance of online sales has also been mixed. Overall online retail spending fell by 1.2% in October, marking a sequential decline. Yet, when viewed over the span of a year, there was a notable 5% increase compared to October 2023, indicating a shift in consumer purchasing habits amidst ongoing economic uncertainties.
Kris Hamer, Director of Insight at the British Retail Consortium, noted, “While October began positively as part of the ‘golden quarter’ with year-on-year growth for the fourth straight month, the looming Budget announcement led to a dip in monthly sales as households held back their spending.” This sentiment mirrors concerns across the retail industry, where the outlook for 2025 looks increasingly challenging due to anticipated regulatory and tax changes.
The industry is bracing for over £7 billion in additional costs in the coming year due to adjustments in Employers’ National Insurance contributions, hikes in minimum wage, and the introduction of new packaging taxes. These changes are expected to pressure retailers, potentially leading to job losses and store closures as they grapple with increased financial burdens.
Prominent UK retailers, including Tesco, Sainsbury’s, Asda, and Morrisons, have alerted Chancellor Rachel Reeves that the proposed increase in employers’ National Insurance contributions is likely to necessitate job cuts and elevate prices, adding to the economic strain felt by consumers.
The retail sector faces an uncertain future as it navigates consumer wariness and impending economic pressures. October’s sales figures highlight the impact of fiscal policies on consumer behaviour, emphasizing the need for government action to mitigate these challenges. Retailers are urging for adjustments to policy timelines to alleviate the anticipated financial impact on the industry.
