Retail sales in Great Britain fall as shoppers rein in festive spending | retail industry

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Retail sales in Great Britain fell unexpectedly in December as cost-conscious consumers cut back on spending in the run-up to Christmas in response to higher prices, surging bills and a weak economic backdrop.

The Office for National Statistics (ONS) said the surprise 1% decline in sales volumes – economists had forecast a rise of 0.5% – was down to factors including rampant increases in food prices and a fall in online purchases as consumers worried about a wave of postal strikes affecting Christmas deliveries.

The fall in December was partly driven by fewer sales of makeup, sports equipment, games, toys, watches and jewelery compared with a year earlier, suggesting consumers queened in spending on gifts as they had less money because of high inflation and soaring bills.

“Retail sales dropped again in December, with feedback suggesting consumers cut back on their Christmas shopping due to affordability concerns,” said Heather Bovill, the deputy director for surveys and economic indicators at the ONS. “Online sales dipped, with feedback indicating postal strikes were leading people towards purchasing more goods in store.”

The ONS said retail sales fell by 5.7% year on year in the three months to the end of December, with sales in the final month of the year 1.7% below pre-pandemic levels.

According to the latest figures, food store sales fell by 0.3% in December, after a 1% rise the previous monthwhen there was a boost as many consumers sought to stretch the costs associated with Christmas by stocking up early, with supermarkets blaming price increases.

Several of the UK’s major retailers reported bumper sales over the festive period but that was largely the result of higher prices rather than volumes.

Earlier this month, the British Retail Consortium said annual food inflation jumped to 13.3% in Decemberthe highest monthly rate since it began collecting data in 2005.

Overall, food store sales were down 5.9% last year, as the lifting of Covid restrictions led to the hospitality industry reopening and consumers targeting more of their budget on eating and going out.

Sales volumes at non-food stores, which includes department, clothing, household goods and other non-food stores, fell 2.1% month on month in December as consumers continued to cut back on spending because of increased prices and affordability concerns.

There was a 6.2% fall in sales at non-food stores, fueled by a slump in purchases at cosmetic and jewelery shops, and of sports equipment, games, toys and watches. Department stores sales fell by 3.1% compared with a rise of 2.1% in November, which benefited from extended Black Friday promotions.

Clothing and household goods shops, such as furniture retailers, provided the only bright spot in December, with sales increasing 1% and 1.5% respectively month on month.

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The amount spent on online shopping fell by 2.9%, with declines across all sectors except household goods and food stores. Some retailers suggest that six days of Royal Mail strikes in December led to a shift to more in-store purchases.

On Friday, The Works, the cut-price seller of books, crafts and toys, said its online sales through the Christmas period had been “disappointing”. It said online sales fell 14% in the 11 weeks to 15 January, compared with a 9.7% rise at its 520 stores, “which we believe was due to consumers losing confidence in retailers’ delivery promises in light of the widely reported postal strikes, and the potential for knock-on effects on other carriers”.

The ONS said overall retail sales volumes fell by 3% in 2022 compared with a 5.2% rise in 2021.

“Looking at the broader picture, retail sales decreased in 2022 compared with 2021, largely reflecting declines in online retailing and food stores,” Bovill said. “In recent months, retail has been especially squeezed by widespread price rises and the higher cost of living, with consumers reducing their spending in response.”

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