UK retail sales growth cools as budget offsets Black Friday

[LONDON] Black Friday discounts failed to prevent a slowdown in UK retail sales as the Labour government’s budget damaged consumer confidence, according to a report by the British Retail Consortium.

Total retail sales increased just 1.4 per cent year-on-year in November, below the 12-month average and the weakest pace since May, the BRC said on Tuesday (Dec 9). Like-for-like growth declined to 1.2 per cent. Strong sales of household appliances and computing products were not enough to compensate for weak demand for clothing and footwear.

“Pre-budget jitters among shoppers meant the month of Black Friday did not deliver as strongly as retailers had hoped or the economy needed,” said Helen Dickinson, chief executive of the British Retail Consortium (BRC).

The report adds to evidence that speculation of tax rises ahead of Chancellor of the Exchequer Rachel Reeves’ budget on Nov 26 hurt the economy. Although Labour ultimately avoided lifting income tax rates, choosing instead to freeze thresholds years down the line, warnings over the bleak state of the public finances still soured the consumer mood during a critical period for retailers.

One in five UK households are struggling financially, according to a separate report on Tuesday from Worldpanel, formerly known as Kantar. Almost one third of all spending in supermarkets in November was on promotions, slightly higher than a year ago, as shoppers try to save money.

The emphasis on offers and lower pricing means that the cost of a Christmas dinner for four is a few pence cheaper than last year at US$43.27, Worldpanel said. Supermarket sales rose below inflation last month, according to the report, while grocery price rises held steady at 4.7 per cent, down from 5.2 per cent in September, which was the highest in 20 months. 

Retailers rolled out Black Friday deals earlier than usual to entice shoppers to spend amid nerves ahead of the budget. Still, that hasn’t always worked. Frasers Group, the company behind Sports Direct and Flannels, recently warned that speculation about tax increases has driven consumers to pull back, leaving the industry with excess stock.

Weak retail sales are also bad news for Chancellor Reeves. Her fiscal balancing act relies on consumers, the engine of the UK economy, drawing down their savings and returning to shops and restaurants. If earnings and spending don’t hold up, Reeves risks a US$53 billion hole in the public finances, according to the UK fiscal watchdog’s assessment of the budget.

Since the pandemic and the cost-of-living crisis, consumers have turned away from discretionary spending, focusing on essentials such as food and energy. On a like-for-like basis, non-food sales declined 0.2 per cent in November, according to the BRC. 

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The BRC’s numbers echo a report from NIQ showing weaker demand for big-ticket items and tech during Black Friday compared with the same period last year. 

Separate figures from Barclays also showed spending on its debit and credit cards falling 1.1 per cent in November from a year ago, the largest decline since February 2021 when the country was in lockdown. Non-essential spending declined for the first time since July 2024, it said.

“Rising household costs and nervousness about the economy continue to impact discretionary buying,” Linda Ellett, UK head of consumer, retail and leisure at KPMG, said.

Food sales were relatively more resilient, growing 2.8 per cent like-for-like in November. Sarah Bradbury, CEO of IGD, said families will indulge in some premium foods over Christmas, while saving money elsewhere. BLOOMBERG