According to the latest industry survey, retail sales grew strongly in August, supported by record warm weather and a cut in interest rates. However, retailers warn that speculation over possible tax rises could hit consumer confidence just as the critical pre-Christmas trading period begins.
The British Retail Consortium (BRC) figures show sales rose by 3.1% compared with last year. Spending on food and drink was robust, while sales of computers and related equipment also performed well as families prepared children for the new school year.
Price rises behind food sales
Despite the headline increase, the BRC said the 4.7% boost in food and drink sales was largely driven by inflation. Shoppers paid higher prices for staples rather than filling their baskets with more goods. Beef, chocolate, and coffee were among the key drivers of inflation in the sector.
Non-food categories showed some encouraging signs. Computing and gaming products continued to sell well, though parents, feeling the pinch, cut back on school uniforms. Furniture sales recorded growth for the second month after a prolonged slump, while home goods such as appliances, DIY products and gardening equipment also recovered.
Technology launches helped boost electronics sales, with Samsung unveiling two new foldable phones in late July and Google releasing its Pixel 10 in August. Overall, non-food sales rose by 1.8% yearly, the third monthly increase in a row.
Uneasy outlook for ‘golden quarter’
Retailers are now turning their attention to the ‘golden quarter’, the three months leading up to Christmas, which often determines annual performance. The BRC warned that despite a solid summer, many businesses remain wary.
The BRC’s chief executive, Helen Dickinson said: “Sunny weather and an interest rate cut helped August round off a solid summer of sales. Despite a better summer, retailers approach the golden quarter with caution. With the later-than-expected Budget falling just days before Black Friday, many are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas.”
The Government confirmed that the Autumn Budget will take place on 26 November. Retailers fear that uncertainty over possible tax changes could cause shoppers to delay or reduce their spending during one of the busiest weeks of the year.
August’s performance built on earlier gains, with July sales up 2.5% and June recording 3.1% growth. Both months were helped by warm weather and the boost to morale from England’s strong showing in the UEFA Women’s Championship.
Consumer confidence under strain
Despite the recent growth, the BRC survey found that shopper confidence declined for the third consecutive month in August. Rising energy bills, continuing food price inflation, and speculation about tax rises weighed on household finances.
Sarah Bradbury, chief executive of the Institute of Grocery Distribution, said many shoppers were beginning to feel the emotional impact of financial pressures: “The emotional weight of rising energy bills and fears of tax hikes in the autumn budget are adding to the strain, especially as unemployment ticks upward.”
She added, however, that there were reasons for cautious optimism: “There are glimmers of relief: interest rates have been cut again, and mortgage rates are easing, offering some financial respite. Financially resilient shoppers may remain more confident, even as they brace for a challenging winter.”
Looking ahead
For now, retailers are encouraged by three consecutive months of sales growth and signs of life in categories such as furniture and home goods. However, with household budgets under pressure, much depends on the government’s budget decisions in late November and how shoppers react in the weeks that follow.
As the festive period approaches, the balance between rising costs, fragile confidence, and easing interest rates will be key in determining whether the high street enjoys a strong finish to the year, or a subdued Christmas season.
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