- Retail sales volumes contracted by 0.3% between November and December
- Food store sales shrank by 1.9% while non-food store purchases rose by 1.1%
UK retail sales volumes fell unexpectedly last month, marking a disappointing festive season for the sector.
The Office for National Statistics (ONS) estimated retail sales volumes contracted by 0.3 per cent between November and December, well below the 0.4 per cent increase predicted by a Reuters poll of economists.
Food store sales shrank by 1.9 per cent to their lowest level since April 2013, dragged down by a weak performance from supermarkets.
Specialist food shops like butchers and bakers, and alcohol and tobacco outlets such as vaping stores were also severely impacted.
This was partially counteracted by a 1.1 per cent bump in non-food store purchases, led by clothing shop sales expanding by 4.4 per cent and a strong Christmas at department stores.
Online spending also grew by 1.5 per cent, the first monthly rise since September, thanks to surging demand at household goods outlets, as well as textile, clothing and footwear sellers.
Decline: The Office for National Statistics (ONS) estimated retail sales volumes contracted by 0.3 per cent between November and December
Over the three months ending December, sales volumes declined by 0.8 per cent compared to the July to September period.
The sales figures represent another massive blow to a retail industry struggling to overcome an inflationary squeeze and subdued consumer confidence.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘With the chancellor under mounting pressure to deliver growth, the news that retail sales fell in December of all months is at the very least unwelcome.
‘The golden quarter isn’t just a phrase trotted out by analysts; it’s a crucial period of time when retailers make enough money to see them through those sluggish early months of the year when people are paying off their credit card bills and thinking ahead to summer sun.
‘With sales disappointing and confidence scraped raw there will be concern that some retailers won’t have a cushion to fall back on and will be vulnerable.’
Pressures are set to escalate in the coming months as tax hikes announced by Chancellor Rachel Reeves in her Autumn Budget take effect.
From April, employers’ National Insurance Contributions will go up from the current 13.8 per cent on annual salaries exceeding £9,100 to a 15 per cent levy on wages above £5,000.
Concurrently, the National Living Wage will increase by 6.7 per cent to £12.21 per hour, while retailers will have their business rates relief cut from 75 per cent to 40 per cent up to a cap of £110,000 per firm.
Many retailers have responded to the impending changes by either cutting jobs or curtailing their hiring plans.
Nearly 170,000 retail workers were made redundant during 2024, a 42 per cent jump on the prior year, according to the Centre for Retail Research.
‘Overall, UK retailers are stuck between a rock and a hard place,’ remarked Charlie Huggins, head of equities at investment service Wealth Club.
He added: ‘The significant increase to labour costs is bad enough, and higher for longer interest rates could yet undermine consumer confidence.’
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