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British retail sales slide amid budget uncertainty and wait for Black Friday Budget blamed for first contraction in private sector for a year
(about 2 hours later)
Sales volume in Great Britain fell for first time in three months, down 0.7% in October as people delayed spending Fall in activity in November pinned on chancellor’s tax rises as official figures also show drop in October retail sales
Business live- latest updates Labour’s first budget in 14 years has been given the “thumbs down” by private sector businesses as it was blamed for the end to a 12-month run of expansion and a fall in retail sales.
Retail sales in Great Britain fell for the first time in three months in October, as uncertainty surrounding Labour first budget in 14 years and the lure of Black Friday bargains delayed consumer spending. Many businesses said the first fall in business activity in November since the same month last year was a result of tax rises announced by Rachel Reeves, while official figures showed retail sales had dropped in October, the first month of the “golden quarter” for retailers before the Christmas rush.
Reporting on the first month of the “golden quarter” for retailers ahead of the Christmas rush, the Office for National Statistics (ONS) said sales fell by 0.7% month on month in October – and revised down the growth figure for September from 0.3% to just 0.1%. Manufacturers registered “a solid decline” in new work, and the rate of contraction accelerated to the fastest since February, according to a closely watched survey by S&P Global Market Intelligence.
Analysts said rising household incomes following a period of strong wages growth and low inflation since the beginning of the year was likely to see an improved outlook for retail after the dust had settled from the budget. Chris Williamson, the firm’s chief economist, said the contraction in November was only marginal but reflected deeper concern about the prospects for the year ahead.
The chancellor, Rachel Reeves, had warned the public to be braced for tax increases in the budget on 30 October, but it was businesses that were particularly hit. Retailers said the rise in the rate of employers’ national insurance contributions would add £7bn to their costs. The S&P Global Flash purchasing managers’ index (PMI) dropped from 51.8 to 49.9, based on polling of company managers this month.
Williamson said: “Business optimism has slumped sharply since the general election, dropping further in November to hit the lowest since late 2022. Companies are giving a clear ‘thumbs down’ to the policies announced in the budget, especially the planned increase in employers’ national insurance contributions.”
Companies blamed weak demand and rising payroll costs for job cuts that could accelerate over the coming months.
The gloom in many quarters of the business community came after uncertainty surrounding the budget last month hit sales on the high street and online.
The Office for National Statistics (ONS) said sales fell by 0.7% month on month in October, and revised down the growth figure for September from 0.3% to just 0.1%.
Analysts said rising household incomes following a period of strong wages growth and low inflation since the beginning of the year was likely to lead to an improved outlook for retail after the dust had settled from the budget.
Reeves, the chancellor, had warned the public to be braced for tax increases in the budget on 30 October, but it was businesses that were particularly hit. Retailers said the rise in the rate of employers’ national insurance contributions would add £7bn to their costs.
Clothing stores in particular bore the brunt of consumers tightening the purse strings last month, partially offset by the growing trend for cosmetic advent calendars that can cost from £60 to £650.Clothing stores in particular bore the brunt of consumers tightening the purse strings last month, partially offset by the growing trend for cosmetic advent calendars that can cost from £60 to £650.
The ONS said that on a quarterly basis – a better guide to the underlying trend than a single month’s figures – sales volumes rose 0.8% in the three months to the end of October compared with the previous quarter. In the year to October 2024, sales volumes were up 2.4%.The ONS said that on a quarterly basis – a better guide to the underlying trend than a single month’s figures – sales volumes rose 0.8% in the three months to the end of October compared with the previous quarter. In the year to October 2024, sales volumes were up 2.4%.
“Retail sales fell back in October following three months of growth,” said Hannah Finselbach, a senior statistician at the ONS. “The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the budget.”“Retail sales fell back in October following three months of growth,” said Hannah Finselbach, a senior statistician at the ONS. “The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the budget.”
Sales at clothing and footwear stores fell 3.1% in October, the largest decline of any category, with other non-food store sales down 1.4%.Sales at clothing and footwear stores fell 3.1% in October, the largest decline of any category, with other non-food store sales down 1.4%.
The ONS said previous growth clothing sales in recent months was fuelled by end of season sales and good weather enticing consumers to shop.
Non-food stores – a combination of department stores, clothing, household and other non-food stores retailers – fell by 1.4%. Sales at supermarkets and food stores decreased by 0.6%.
Kris Hamer, the director of insight at the British Retail Consortium, said: “While October produced a positive start to the ‘golden quarter’, with year-on-year growth for the fourth month in a row, there was a monthly decline due to pre-budget jitters from households.”
He said fashion took the brunt of this hit after milder weather last month put off winter purchases.
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The ONS said previous growth clothing sales in recent months was fuelled by end of season sales and good weather enticing consumers to shop.
Nonfood shops – a combination of department stores, clothing, household and other non-food retailers – fell by 1.4%. Sales at supermarkets and food stores decreased by 0.6%.
Kris Hamer, director of insight at the British Retail Consortium, said: “While October produced a positive start to the ‘golden quarter’, with year-on-year growth for the fourth month in a row, there was a monthly decline due to pre-budget jitters from households.”
He said fashion took the brunt of this hit after milder weather last month put off winter purchases.
The weaker-than-expected overall retail sales figures sent the pound to a six-month low against the US dollar. Sterling fell as low as $1.255, its weakest level since May, extending recent losses as economic worries have risen.The weaker-than-expected overall retail sales figures sent the pound to a six-month low against the US dollar. Sterling fell as low as $1.255, its weakest level since May, extending recent losses as economic worries have risen.
“A fall in sales in October does not bode well for the retail industry, as this month typically marks the start of the festive shopping season,” said Greg Zakowicz, a senior e-commerce expert at Omnisend. Asif Aziz, retail director at the mobile phone operator EE, said: “October has been a quiet month on the high street with shoppers clearly keeping their powder dry ahead of Black Friday sales. Uncertainty around the budget will have also fostered a ‘save now, spend tomorrow’ mindset, as consumers start to factor in increased expenditure in the run-up to Christmas.”
The only sectors where sales grew were household goods, a rise of 0.1%, and fuel sales, an increase of 0.6%. The only sectors where sales grew were household goods, which rose 0.1%, and fuel, which grew 0.6%.
Black Friday could prove to be a bigger event than in recent years as bargain hunters continue to upgrade their technology.
Asif Aziz, the retail director at the mobile phone operator EE, said: “October has been a quiet month on the high street with shoppers clearly keeping their powder dry ahead of Black Friday sales. “Uncertainty around the budget will have also fostered a save now, spend tomorrow mindset, as consumers start to factor in increased expenditure in the run-up to Christmas.”