Warm weather helped UK retail sales grow stronger than expected in August, though the industry says this will not offset the higher costs imposed by the Chancellor in last year’s budget.
Sales volumes for August rose by 0.5% month-on-month, matching the revised 0.5% gain in July, and above the expected 0.3% increase.
Growth was led by clothing stores (+5.3%), non-store retailing (+4%), and specialist food shops (+4.5%), with retailers citing favourable weather as a key driver.
Over the three months to August, sales volumes edged down 0.1%, a slower pace of decline than the 0.6% drop in the three months to July.
On an annual basis, sales increased 0.7% in August, easing from July’s 1.8% rise but still marking the third consecutive month of growth.
Compared with the same three months in 2024, volumes were up 0.8%, though activity remained 2.1% below pre-pandemic levels. Online sales values climbed 0.4% month-on-month and 4.7% year-on-year, with non-store retailing notching its seventh straight monthly gain.
Dr Kris Hamer, Director of Insight at the British Retail Consortium, said: “August closed out a bright summer of retail sales on a high note, with volumes up for the third month in a row.
“The prolonged sunshine, bank holiday and interest rate cut all helped to boost sales, especially for clothing and books. People are also spending more on their homes, with furniture seeing a boost for another month following a long period of decline.
“Even if this sales growth continues, it would not be nearly enough to mitigate the mass of costs hammering the industry since last year’s Budget.
“Business confidence remains weak. Earlier this summer, 56% of CFOs described their feelings about trading conditions over the next 12 months as “pessimistic”.
“And, there is little sign of improvement in the run up to Christmas, especially with the Budget falling so close to Black Friday and fears of potential further tax rises.
“Government can help improve confidence by ensuring business rates reforms deliver a meaningful reduction for retailers and that no shop pays more. This will allow retailers to invest more in jobs and stores, and most importantly, protecting customers from the increased costs filtering down to them.”
Nicholas Hyett, investment manager at Wealth Club, commented: “It was a scorching summer for retailers, as hot and dry weather saw every sector except automotive fuel reporting growth in August.
“In fact sales have proven more resilient than markets expected, which is a welcome bit of good news at a time when sentiment around the UK economy is pretty gloomy. Sales are being helped by the fact wages continue to grow faster than inflation – though with food prices accelerating ahead we do worry that discretionary items could see demand squeezed as time goes on.
“The Bank of England will also be pretty pleased with this announcement. Strong retail sales imply consumers are not in need of support from lower interest rates at the moment, suggesting the focus on inflation that led the MPC to leave interest rates unchanged yesterday is the right call.”
Government borrowing rises
UK government borrowing was higher than expected in August, according to the latest official figures.
Borrowing – the difference between public spending and tax income – was £18bn in August. That was up £3.5bn from the same month last year and the highest August borrowing for five years, the Office for National Statistics (ONS) said.
The UK statistics body said that while tax and National Insurance receipts were higher, they were outstripped by increased spending on public services, benefits and debt interest.
Borrowing over the first five months of the financial year has now reached £83.8bn, the ONS said, which is up £16.2bn from the same period last year.
#Uplift #shops #needed #retailers #Daily #Business