Home Money Retail sales decline during crucial holiday trading period

Retail sales decline during crucial holiday trading period

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Decline: The Office for National Statistics (ONS) estimated that retail sales volumes contracted by 0.3 per cent between November and December.
  • Retail sales volumes contracted 0.3% between November and December
  • Sales in food stores decreased 1.9% while purchases in non-food stores increased 1.1%

UK retail sales volumes unexpectedly fell last month, marking a disappointing festive season for the sector.

The Office for National Statistics (ONS) estimated that retail sales volumes contracted 0.3 percent between November and December, well below the 0.4 percent rise predicted by a Reuters poll of economists.

Grocery store sales fell 1.9 percent to their lowest level since April 2013, dragged down by weak performance by supermarkets.

Specialized food businesses, such as butcher shops and bakeries, and alcohol and tobacco sales establishments, such as vaping shops, were also seriously affected.

This was partially offset by a 1.1 percent increase in purchases in non-food stores, led by a 4.4 percent sales expansion in clothing stores and a strong Christmas in department stores.

Online spending also grew 1.5 percent, the first monthly increase since September, thanks to growing demand at home goods outlets as well as textile, clothing and footwear sellers.

Decline: The Office for National Statistics (ONS) estimated that retail sales volumes contracted by 0.3 per cent between November and December.

For the three months ending in December, sales volumes decreased by 0.8 percent compared to the July to September period.

The sales figures represent another blow to a retail industry struggling to overcome an inflationary squeeze and subdued consumer confidence.

Danni Hewson, head of financial analysis at AJ Bell, said: ‘With the chancellor under increasing pressure to deliver growth, the news that retail sales fell in December is unpleasant to say the least.

‘The golden quarter is not just a phrase trotted out by analysts; It’s a crucial period when retailers make enough money to get through those first slow months of the year, when people pay their credit card bills and think about the summer sun.

“With sales disappointing and confidence weakened, there will be concerns that some retailers will have no cushion to fall back on and will be vulnerable.”

Pressures are expected to increase in the coming months as tax increases announced by Chancellor Rachel Reeves in her Autumn Budget come into force.

From April, employers’ National Insurance contributions will rise from the current 13.8 per cent on annual wages over £9,100 to a 15 per cent tax on wages over £5,000.

At the same time, the national living wage will rise by 6.7 per cent to £12.21 an hour, while retailers will have their business rates relief reduced from 75 per cent to 40 per cent up to a cap of £ 110,000 per company.

Many retailers have responded to the impending changes by cutting jobs or scaling back their hiring plans.

Nearly 170,000 retail workers were laid off during 2024, a 42 percent increase from the previous year, according to the Retail Research Center.

“Overall, UK retailers are caught between a rock and a hard place,” said Charlie Huggins, head of equities at investment service Wealth Club.

He added: “The significant rise in labor costs is bad enough, and higher interest rates for longer could undermine consumer confidence.”

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