UK retail sales and consumer morale slide ahead of Budget

[MANCHESTER] British retail sales dropped in October and a closely watched gauge of household sentiment fell this month, adding to signs of waning consumer spending ahead of finance minister Rachel Reeves’ Budget on Nov 26.

Retail sales volumes fell by 1.1 per cent in October compared with a month before, their first month-on-month fall since May, the Office for National Statistics (ONS) said.

Economists polled by Reuters had expected sales to be flat compared with the previous month.

Compared with October a year earlier, retail sales were just 0.2 per cent higher, against forecasts of a 1.5 per cent annual increase.

The sterling fell briefly against the dollar but soon recovered.

Earlier on Friday (Nov 21), Britain’s longest-running consumer survey, GfK, showed a broad-based drop in consumer morale this month, which suggested that the public was “bracing for bad news” in Reeves’ Budget.

Separate ONS data showed a higher-than-expected government borrowing in October, underscoring the scale of the challenge facing Reeves.

She is expected to need to raise £20 billion (S$34.2 billion) to £30 billion through higher taxes due to an expected growth downgrade from the government’s Budget watchdog, as well as higher borrowing costs and an inability to pass planned welfare cuts through parliament.

Overall consumer spending has been subdued due to a continued high savings rate, which economists say may reflect a surge in inflation like in 2022, a more recent weakening in the jobs market and concerns about tax rises in the Budget.

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Recent updates from major retailers have expressed nervousness about the impact of the upcoming Budget on consumer sentiment, particularly for more discretionary purchases.

However, supermarket Sainsbury’s and food and clothing retailer Marks & Spencer were both upbeat on Christmas trading prospects. REUTERS