Consumer Caution Slows British Retail Ahead of Autumn Budget

New reports released this Tuesday indicate a discernible slowdown in British retail sales and broader consumer spending. Both the Barclays consumer card spending report and the British Retail Consortium (BRC)/KPMG report on retail sales attribute this moderation to growing consumer caution, primarily driven by anticipation of the Chancellor’s upcoming annual Autumn Budget.

Delving into the Barclays report, consumer card spending witnessed a 0.7% year-on-year decline in September, a decrease from the 0.5% growth recorded in August. This figure notably lags behind the latest CPIH inflation rate of 4.1%. Essential spending saw a more significant fall of 2.6%, while discretionary spending, although still growing, slowed considerably to just 0.2%.

Despite the overall slowdown, some sectors demonstrated resilience. Clothing, furniture, and beauty categories all experienced stronger months, suggesting that consumers are prioritising affordable 'pick-me-up' purchases amidst wider financial cutbacks. Specifically, clothing spend increased by 2.1%, with transaction growth at 3.1%. While these figures are below the inflation rate, they mark eight consecutive months of year-on-year growth, with 20% of shoppers reporting increased spending on clothes, shoes, and accessories in September. Pharmacy, health & beauty spend saw an impressive 9% rise, despite a 0.6% fall in transaction numbers, indicating the sector's ability to absorb and pass on higher prices.

External factors also played a role in September's spending patterns. Transport strikes in London significantly impacted public transport spending, which saw its largest decline since March 2021, falling 2.6%. Over a third of Londoners reported that strike action reduced their monthly outgoings, leading to a £26 reduction in non-food retail spend. Across the UK, face-to-face spending decreased by 1.6%, marking its most substantial fall since June 2024.

Barclays further reported a decline in consumer confidence regarding the strength of the UK, European, and global economies in September, falling to 25%, 29%, and 26% respectively. Interestingly, consumers' belief in their personal ability to live within their means reached its highest level in over four years at 78%. This comes as 44% of UK adults are making changes to their personal finances in anticipation of November's Autumn Budget, with 35% of this group actively building a savings buffer.

Complementing these findings, the BRC/KPMG report, covering the five weeks to 4 October, showed that total retail sales increased by 2.3%. However, this growth was slower than in previous months. Non-food sales grew by only 0.7%, falling below the 12-month average growth of 0.9%. In-store non-food sales saw a modest increase of 0.5%, which was lower than the 0.8% growth recorded in September 2024. Online non-food sales increased by 1%, significantly short of the 3.4% growth observed in September 2024.

Helen Dickinson, Chief Executive of the BRC, commented on the findings, attributing the slower retail spending to the looming Budget and the burden of higher household bills. She noted that milder weather also contributed, with shoppers delaying purchases of autumn and winter wardrobes. Dickinson highlighted that rising inflation and a potentially taxing Budget are weighing heavily on households as they plan their Christmas spending. She also raised concerns for retailers, who face difficult investment and hiring decisions during the crucial Golden Quarter, citing uncertainty over business rates bills due in April. She urged the Chancellor to exempt large anchor stores from potential new business rates surtaxes in the Budget announcements to safeguard jobs and reduce inflationary pressures on businesses and households alike.