UK retail slump hits consumers ahead of budget

Retail sales in the UK were weaker than expected in November, reflecting a subdued consumer mood as economic growth slowed and unemployment rose.

The total volume of goods sold online and in stores was down 0.1%, following a revised 0.9% plunge the previous month, the Office for National Statistics said Friday. Economists surveyed expected a 0.3% increase in November.

The weaker-than-expected numbers are indicative of muted consumer demand, as households are more concerned with maintaining their financial stability than increasing spending. The slowdown is also occurring as many families recover from the economic shocks of the pandemic and the recent surge in energy prices.

Uncertainty over budget hits consumer wallets

The subdued activity arose during a month overshadowed by Rachel Reeves’ second budget. The chancellor unveiled additional tax increases on top of the £40 billion package announced in October 2024, as she sought to secure extra funds for higher welfare payments and enhance her fiscal headroom. 

Savings rates are high, and spending has been soft as UK households seek to strengthen their personal finances in the wake of the Covid-19 pandemic and energy price shocks. A decline in food sales helped offset increased department store purchases in the month, according to ONS numbers.

The administration has stated that these measures are necessary to fund welfare spending and secure fiscal stability in the country. Yet the announcement has come as a cause for household restraint.

“It’s possible the uncertainty generated by the Budget in late November damped households’ willingness to spend, but we’d put more weight on the longer-lasting effects of weak employment and slowing wage growth,” said Paul Dales at Capital Economics on Friday.

Stormy weather also contributed to keeping consumers away from shops in November, with high street footfall declining 1.2% year-on-year, according to the BRC. The ONS also blamed a fourth consecutive drop in supermarket sales on low footfall in November.

The Bank of England’s cut does little to revive confidence

The Bank of England made a move in favor of the economy this week, cutting interest rates to 3.75%, reflecting easing inflation and a slowdown in demand. Still, lower borrowing costs have not effectively boosted consumers’ spending. BoE networks of regional agents say spending on goods and services has become stagnant and unlikely to recover in the near term. 

Some early signs indicate a potential rebound, with GfK’s consumer sentiment report, published earlier, showing Brits ready to make major purchases at a rate not seen since 2022.

A separate survey of households from GfK, a market research company, released on Friday showed a gauge of confidence edged up to minus 17, but this was no higher than it had been 12 months earlier. “On that basis, 2025 has been a year of no progress,” said Neil Bellamy, consumer insights director at GfK.

Borrowing in the fiscal year to date is currently £132.3 billion, 8% higher than in the same period in 2024.

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