UK total retail sales grew by 2.5% year-on-year in July, compared to 0.5% in the same period last year and outpacing the 12-month average growth of 1.9%. Yet the latest figures from the BRC- KPMG Sales Monitor will not be enough to avoid retail challenges later in the year, the BRC has warned.
Food sales experienced the strongest growth, increasing 3.9% year-on-year in July. This compares to a growth of 3.3% in July 2024 and a 12-month average growth of 3.2%. However, BRC chief executive Helen Dickinson said the growth was largely the result of food inflation increasing spend rather than a rising volume of sales.
Non-food sales rose 1.4% year-on-year in July, against a decline of 1.8% in July 2024 and a 12-month average growth of 0.8%. Of these instore non-food sales rise by 1.9% year-on-year in July, compared to a fall of 3% in July 2024 and a 12-month average growth of 0.2%.
Online penetration rate falls
Online performed less strongly, according to the BRC. The proportion of non-food items bought online (the online penetration rate) decreased to 34.8% in July from 35.1% the same time last year. This was also down from the 12-month average of 36.7%. Online non-food sales increased by only 0.3% year on year in July, against a growth of 0.3% in July 2024. This was below the 12-month average growth of 1.9%.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Food sales did well in early July thanks to warm weather and a packed sporting schedule, though this momentum failed to hold for the rest of the month. Rising food inflation meant increased spending was more a result of higher prices than improved demand.”
“Fashion sold well early in the month, but deteriorated as the weather worsened, while homeware and indoor furniture grew steadily, recovering from the previous year’s decline. Gaming and toys sold particularly well, as nostalgic adults purchased products like Lego,” she said.
But Dickinson warned that the limited growth means little hope for retailers of covering the increased costs they now face, especially if additional taxes are imposed in the next budget. “With sales growth at these levels, it is barely touching the sides of covering the £7bn new costs imposed on retailers at the last Budget,” she said.
“If the upcoming Autumn Budget sees more taxes levied on retailers’ shoulders many will be forced to make difficult choices about the future of shops and jobs, and ongoing pressure would push prices higher. Ultimately, this means more families struggling, particularly those on lower incomes, reduced consumer spending and a drag on economic growth.”
Big ticket items at risk
Linda Ellett, UK head of consumer, retail & leisure at KPMG, warned of the impact on big ticket items too. “While the majority of consumers that KPMG surveys are confident in their ability to balance their monthly household budgets, big ticket purchases are more considered in the context of rising essential costs and ongoing caution about the economy and labour market. Holidays are the priority for many this summer, but those heading away have had to account for a higher cost of travel. Consequently, spending in some areas of the retail sector remains subdued and competition for consumer spend will remain fierce.”
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