UK total retail sales increased 1% year-on-year in August, however industry experts are concerned a challenging retail environment could dominate the rest of 2024 unless the upcoming October budget offers some decisive action on business rates.

The British Retail Consortium (BRC)’s chief executive Helen Dickinson noted that sales growth picked up in August, particularly for food but also for summer clothing, health and beauty products as people came together to host barbecue and picnic gatherings for family and friends, prepared for trips away and summer social events.

She also pointed out that following a difficult summer for much of retail, and the possible weakening of consumer spending as energy bills rise in October, many will be waiting for the Chancellor’s Autumn Budget before finalising their investment strategies.

She said: “Labour’s first budget is a golden opportunity to make good on their manifesto commitment and fix the broken business rates system which is holding back investment in people, places, technology and limiting growth. Decisive action will benefit working people across the country.”

Potential tax rises, increasing costs could dampen spending in cooler weather

UK head of consumer, retail and leisure at accounting firm KPMG, Linda Ellett believes consumer sentiment is gradually starting to improve, but there still remains some nervousness around potential tax rises and the cost of putting the heating back on when the cooler weather arrives.

She warned the fragile nature of consumer confidence means shoppers will continue to be driven by price and value, moving from brand to brand to find the best price benefit. As she views it, this could likely see retailers using promotional activity to seek to win at this.

Ellett explained: “As green shoots of growth start to appear, those retailers looking to seize on slowly returning consumer confidence will need to demonstrate best value for money, as well as tap into the ‘experience’ factor as consumers focus their discretionary spend on having fun or experiences over owning more ‘stuff’. Winning retailers will need clear differentiation, targeting specific consumer needs, and executing with consistency and clarity.

“Despite summer finally making an appearance and a slight uptick in consumer confidence, shoppers did not catch up with their spending during August, with total sales growth of only 1% reflecting the challenging retail environment that is likely to dominate for the rest of this year. Fashion retailers will be hoping sales growth continues as they look to dispose of excess summer stock as we head into the key autumn season.”

CEO of grocery data and analysis firm IGD, Sarah Bradbury, echoed this and added that while shopper confidence has remained stable for the third month in a row, the outlook for the year ahead continues with “caution”.

Bradbury said: “As we approach October’s Budget announcement, we expect to see more movement in confidence as shoppers begin to understand what the future might hold.”

August retail data in-brief

The latest data shared by BRC-KPMG retail sales monitor for the four weeks from 28 July to 24 August 2024 revealed:

• UK total retail sales increased by 1% year-on-year in August against a growth of 4.1% in August 2023. This was above the three-month average growth of 0.4% and below the 12-month average growth of 1.2%

• Non-food sales decreased 1.7% year-on-year over the three months to August, against a decline of 0.2% in August 2023. This is above the 12-month average decline of 2%. For August, non-food was in decline year-on-year

• In-store non-food sales over the three months to August decreased by 2.8% year-on-year against a growth of 1.3% in August 2023. This is below the 12-month average decline of 2.1%

• Online non-food sales increased by 1.5% year-on-year in August against an average decline of 1.7% in August 2023. This was above the three-month average increase of 0.3% and above the 12-month average decline of 1.8%

• The online penetration rate (the proportion of non-food items bought online) increased to 34.7% in August from 34.1% in August 2023. This was below the 12-month average of 36.3%.