Figures released today by the Office for National Statistics (ONS) show UK retail sales in December dropped at the sharpest rate since the Covid lockdown in January 2021 as cash-strapped consumers cut back on their Christmas shopping.
Retail sales volumes slid 3.2% last month, having risen by 1.4% in November when retailers ramped promotions around Black Friday.
Non-food store sales were down 3.9% in December, with department stores, clothing, household and other non-food outlets seeing the biggest falls. Retailers partly blamed the scale of the decline on consumers buying gifts earlier than usual in November to spread the cost of Christmas.
It was also a disappointing period for food stores, with sales dropping 3.1% after a 1.1% rise in November. The ONS figures are in sharp contrast to the robust Christmas trading figures reported by several major retailers, including Tesco, Sainsbury’s and Marks & Spencer.
Meanwhile, there was a 2.1% fall for online retailers, with many blaming the fall on economic factors, in particular, the effect of inflation.
The ONS data shows that overall retail sales volumes fell 2.8% during 2023 as a whole, after a fall of 3.4% in 2022, reflecting the impact of high inflation and the cost of living pressures.
Heather Bovill, a deputy director at the ONS, commented: “The longer-term picture remains subdued, with quarterly sales dipping, while annual sales volumes fell for the second consecutive year, to their lowest level in five years.”
Oliver Vernon-Harcourt, head of retail at Deloitte, noted that retailers across all categories had been dealt a significant blow over the festive period. “This paints a challenging picture for retail in the near future, in a sign that cautious consumers are feeling the long-term effects of a strain on their spending power,” he said.
“2024 may be a tale of two halves, with mortgage rates set to rise further and inflation continuing to fluctuate. The first half of the year will remain challenging for consumers, whose spending is hindered by rising rates and economic uncertainty. However, the second half could be a more positive story, with the impacts of wage increases, reduced national insurance and falling inflation felt more widely by consumers.
“Despite this varied outlook, retailers will want to capitalise on improving consumer confidence, with many looking to attract customers by investing in hybrid experiences across in-store and online. Likewise, many will continue to invest in both premium and value products, as well as targeted product lines that cater to a diverse range of consumers.”
