Retail sales contract during the crucial festive trading period

  • Retail sales fell 0.3% between November and December
  • Turnover in food stores shrank by 1.9%, while purchases in non-food stores increased by 1.1%

UK retail sales fell unexpectedly last month, marking a disappointing festive season for the sector.

The Office for National Statistics (ONS) estimated that retail sales shrank by 0.3 percent between November and December, well below the 0.4 percent increase predicted by a Reuters poll of economists.

Turnover in food stores shrank by 1.9 percent to the lowest level since April 2013, due to weak performance by supermarkets.

Specialist food shops such as butchers and bakers, and alcohol and tobacco shops such as vape shops were also badly hit.

This was partly offset by a 1.1 percent increase in non-food store purchases, led by clothing store sales growth of 4.4 percent and a strong Christmas in department stores.

Online spending also rose 1.5 percent, the first monthly increase since September, thanks to rising demand at home goods stores and textile, clothing and shoe sellers.

Decline: The Office for National Statistics (ONS) estimated that retail sales shrank by 0.3 percent between November and December

For the three months ending in December, sales volumes fell 0.8 percent compared to the July to September period.

The sales figures are another huge blow to a retail sector struggling to overcome inflation and dampened consumer confidence.

Danni Hewson, head of financial analysis at AJ Bell, said: ‘With the Chancellor under increasing pressure to deliver growth, the news that retail sales fell in December is unwelcome to say the least.

‘The golden district is not just a phrase that analysts proclaim; it’s a crucial period when retailers make enough money to get through the slow first months of the year, when people pay off their credit card bills and think ahead to the summer sun.

‘With sales down and confidence eroded, there will be concerns that some retailers will have no buffer to fall back on and will be vulnerable.’

The pressure will escalate in the coming months as the tax increases announced by Chancellor Rachel Reeves in her fall budget take effect.

From April, employers’ national insurance contributions will rise from the current 13.8 per cent on annual salaries over £9,100 to a 15 per cent levy on wages over £5,000.

At the same time, the National Living Wage will rise by 6.7 per cent to £12.21 per hour, while retailers’ business rates will be reduced from 75 per cent to 40 per cent, up to a maximum of £110,000 per business.

Many retailers have responded to the coming changes by cutting jobs or curtailing their hiring plans.

According to the Center for Retail Research, nearly 170,000 retail workers were laid off in 2024, a 42 percent increase from the previous year.

“Overall, UK retailers are stuck between a rock and a hard place,” said Charlie Huggins, head of equities at investment service Wealth Club.

He added: “The significant increase in labor costs is bad enough, and higher longer-term interest rates could undermine consumer confidence.”

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