UK retail sales jumped 2.5% in July compared to the same month last year, as PA Media reports, but industry leaders warn this growth "barely touches the sides" of covering increased business costs. The uptick significantly outpaced the 0.5% increase recorded in July last year and exceeded the 12-month average of 1.9%, according to British Retail Consortium (BRC)-KPMG data.
According to PA Media, the British Retail Consortium said the growth fails to offset the £7 billion in new expenses imposed on retailers by the last budget. The figures tracking retail performance across the UK reveal ongoing pressure on the sector despite the apparent recovery.
Food sales surge amid inflation concerns
Food sales climbed 3.9% compared to July last year, driven by warm weather conditions and a busy sporting calendar, PA Media said. However, food inflation now stands at 4%, meaning the increased spending largely reflects higher prices rather than genuine growth in consumer demand.
The fifth warmest July on Met Office record contributed to stronger sales of home appliances and food and drink items, as PA reports. Rising inflation pressure affects both businesses and consumers, creating ongoing challenges for retailers.
Non-food retail shows mixed performance
Non-food sales increased 1.4% after declining 1.8% in July last year, demonstrating a recovery in this sector according to PA Media. Fashion items performed well early in the month but sales deteriorated as weather conditions worsened, while homeware and indoor furniture maintained steady growth.
Linda Ellett, UK head of consumer, retail and leisure markets at KPMG, said: "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."
Industry warns of mounting pressures
BRC chief executive Helen Dickinson warned about the sustainability of current growth levels, as PA Media reports. "With sales growth at these levels, it is barely touching the sides of covering the £7 billion new costs imposed on retailers at the last Budget," she said.
"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," Dickinson added according to PA Media. "Ultimately, this means more families struggling, particularly those on lower incomes, reduced consumer spending and a drag on economic growth."
Consumer spending patterns shift
Separate Barclays data showed consumer card spending grew 1.4% year-on-year in July, recovering from a 0.1% decline in June, PA Media said. Discretionary spending increased 2.4% as changeable weather prompted purchases for both sunny and rainy day activities.
Clothing sales performed strongly with 4.2% growth, while online retail spending excluding groceries reached 4.9%, up from 2.4% in June, according to PA Media. Shoppers took advantage of discounted items and sales events including Prime Day.
Beauty sector leads consumer confidence trends
Pharmacy, health and beauty sectors showed particularly strong performance, up 9.8%, benefiting from the post-Covid "lipstick effect" where consumers seek affordable luxuries, as Barclays said. However, confidence in the UK economy dropped three points to 22% in July, the lowest level since January's 21%, PA Media reports.
Karen Johnson, head of retail at Barclays, said: "The summer sales, changeable weather and shoppers seeking the "feel-good factor" led to a strong July for retailers, particularly among beauty, clothing and furniture stores. While confidence in the UK economy remains subdued, prudent money management, supported by the growing popularity of AI tools to help with budgeting, is contributing to a continued resilience in personal and household finances."
Sources used: "PA Media", "BRC", "KPMG", "Barclays" Note: This article has been edited with the help of Artificial Intelligence.
