UK retailers reported a sharp deterioration in sales during August as prolonged weak demand continued to weigh on trading, according to the Confederation of British Industry’s latest Distributive Trades Survey.
The CBI retail sales balance fell to -48 from -26 in July, showing that substantially more respondents reported lower sales volumes than growth compared with the same period a year earlier.
The measure is a weighted survey balance rather than a percentage change in total retail sales. It nevertheless represents a marked deterioration and was weaker than retailers had expected ahead of the month.
Businesses expect sales to remain in decline during September, although at a slower rate, with the expectations balance improving to -22.
Sales were also considered poor for the time of year. That balance fell to -26 from -18 in July, while businesses expect sales to remain below seasonal norms in September.
Retail sentiment weakened further, with the quarterly business-situation balance falling to -29 from -15 in May.
Investment intentions provided one of the few improvements. Retailers still expect to reduce capital expenditure during the next 12 months, but the balance rose to -16 from -52 in May — its strongest reading since February 2024.
Employment also continued to fall, although at a slower rate. The headcount balance improved to -19 from -30 in May, with a similar rate of contraction expected next month.
The combination suggests retailers remain cautious about current demand while becoming somewhat less pessimistic about longer-term investment.
Businesses have spent several years absorbing increases in wages, energy, property costs, business rates, supply chain expenses, and other operating costs. Weak sales make those pressures harder to manage because companies have less freedom to raise prices without losing volume.
The CBI found that selling-price inflation accelerated in August and is expected to increase further in September. That creates a difficult balance between protecting margins and retaining customers whose spending remains constrained.
Promotional activity can support sales volumes but reduces profitability where suppliers or operating costs do not fall at the same pace. Retailers therefore have to make increasingly precise decisions over pricing, inventory, product mix, and discounting.
Online retail was also weak. Internet sales volumes contracted rapidly during the year to August and are expected to continue falling at a similar rate in September.
That is significant because online channels no longer provide the automatic growth offset they once offered traditional retailers. Digital sales are now mature across many categories and carry their own costs in fulfilment, returns, marketing, technology, and customer acquisition.
Orders placed with suppliers continued to decline, indicating that weak demand is feeding backwards through the supply chain. Retailers expecting slower sales have an incentive to reduce inventory commitments and preserve working capital.
Those decisions can create wider effects for manufacturers, distributors, logistics operators, and wholesalers. The CBI’s broader distribution figures also weakened markedly in August.
Inventory management will become more important as retailers prepare for the final months of the year. Christmas trading remains disproportionately important to many businesses, meaning purchasing and staffing decisions have to be made before consumer demand is fully visible.
Ordering too aggressively creates the risk of excess stock and discounting. Excessive caution can leave companies unable to capture an improvement in demand if confidence strengthens later in the year.
The improvement in capital-expenditure expectations may reflect investments that companies consider necessary even during weak trading. Technology, automation, warehouse systems, payments, e-commerce platforms, and customer analytics can reduce operating costs and improve productivity.
The employment figures point to a similar restructuring. Retailers can reduce overall headcount while still recruiting for logistics, data, technology, and specialised operational positions.
The survey therefore presents a sector still contracting but not simply freezing investment. Businesses are continuing to make decisions about productivity and future capacity while controlling labour and inventory more tightly in response to weak demand.
September is expected to be less severe rather than strong. A sustained improvement will require better sales volumes and confidence over several months, particularly as retailers commit stock and staffing for the most important trading period of the year.
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