Retail sales experienced a lift this summer, driven by favourable weather conditions and increasing real incomes. However, the sector remains under pressure, looking towards the festive period for a more substantial uplift.
According to the Office for National Statistics, sales decreased by 0.1% in the three months to August 2025 compared with the previous three months ending May 2025. This followed a 1.5% decline in the three months to July. The ONS reported that reductions in automotive fuel and computer and telecoms equipment stores were partially offset by gains in non-store retailing and clothing outlets.
Last autumn’s Budget delivered a blow to the high street, with a notable rise in employer National Insurance contributions adding £2 billion in costs to the sector. The industry continues to grapple with low spending levels, a shift towards online shopping, and the expanding experience economy. Over the past decade, approximately 10% of retail jobs have been lost.
Dr Kris Hamer, director of insight at the British Retail Consortium, stated, “Even if this sales growth continues, it would not be nearly enough to mitigate the mass of costs hammering the industry since last year’s Budget… business confidence remains weak.”
As the festive season approaches, retailers are hopeful for a stronger performance during the golden quarter. Deann Evans, managing director, EMEA, at Shopify, commented on the need for retailers to convert early demand into sustained momentum.
Matt Dalton, consumer sector leader at Forvis Mazars, cautioned that consumers are becoming more selective in their spending. Despite improvements in household finances due to rising real incomes, consumer confidence remains cautious. He added, “The labour market is cooling, and many consumers are worried about the economic outlook, leading them to be more selective and tactical in their spending.”
