UK Retail Sales Show Unexpected Boost But Caution Looms
The UK retail sector witnessed a period of mixed fortunes in July, according to figures released by the Office for National Statistics (ONS) on Friday. While generally positive, the data also presented reasons for caution. This sentiment was echoed by BDO's latest High Street Sales Tracker, which offered some encouraging news for August. Focusing on July's official statistics, sales volumes experienced a 0.6% month-on-month increase, building on a 0.3% rise in June. On a year-on-year basis, volumes grew by 1.1%, though they remained 2.2% below pre-pandemic levels seen in February 2020. Notably, the 0.6% monthly rise surpassed analysts' expectations, who had predicted a more modest 0.2% increase.
A significant highlight for the month was the robust performance of non-store retailers and the fashion sector. Retailers attributed this stronger growth to the introduction of new products, favourable weather conditions, and a boost from events like the UEFA Women’s Euro 2025 tournament. Specifically, textile, clothing, and footwear volumes surged by approximately 2.5%, mirroring the increase seen in non-store retailers. The fashion sector's contribution was instrumental in the overall 0.6% rise in non-food store volumes. In terms of value, online spending rose by 2% month-on-month and 3.7% year-on-year, contributing to a 1% monthly increase in total consumer spend, encompassing both in-store and online sales.
Delving into consumer spending patterns, it became evident where their money was being directed. Deann Evans, Managing Director, EMEA, at Shopify, highlighted that "outdoor activities remained front of mind for UK consumers." This was reflected in soaring sales of Pop-Up Tents (up 169.1%), Footballs (up 94.5%), and Pool Toys (up 65.9%) in July compared to June. Summer events and cultural moments also acted as strong motivators, with the Oasis Live 25 Tour likely driving increases in Bucket Hats (up 17.2%) and Parkas (up 16.1%). Furthermore, despite the peak summer holiday season, parents were already preparing for "back to school," as sales of School Uniforms skyrocketed by almost 500% last month, indicating a consumer trend towards early preparation and leveraging sales opportunities, a finding consistent with Shopify's 2024 UK State of Commerce Report.
While welcoming the positive figures, analysts maintained a cautious outlook. Kien Tan, Senior Retail Adviser at PwC, observed that "While July’s year-on-year sales growth was similar to June’s and an improvement on May, sales growth has fallen back materially since March and April, confirming that consumer spending had indeed been pulled forward by the warm weather earlier in the spring." Tan further noted that overall retail sales volumes have remained below pre-pandemic levels for three years, suggesting a lack of full recovery in consumer demand despite population growth. He identified fashion as the primary "bright spot" but concluded that "it's clear that the momentum in retail spending is slowing."
Jacqui Baker, head of retail at RSM UK, attributed the good results to "the hottest summer on record combined with sporting events, concerts, and the usual influx of overseas visitors." She specifically cited the Oasis reunion as providing a boost to hotels, pubs, and retailers as fans purchased new outfits for the event. Baker suggested that "the positive trend remains intact," following tax and tariff disruptions in April, and despite a slight dip in consumer confidence in July, it appears to be recovering. However, she warned of potential setbacks, stating that "there’s every possibility that this progress could be undone with ongoing speculation and uncertainty over tax rises in the lead up to the later than expected Budget. This uncertainty could be a big hit to the all-important Golden Quarter."
Cande Cooper, retail partner at Deloitte, added another layer to the analysis, noting that "While inflation persists, particularly in food, we are seeing consumers prioritising small luxuries such as clothing and beauty, as well as spending on experiences." Looking ahead, Cooper described the outlook for retail as a "mixed bag." Despite strong July sales growth and the success of non-store retailers, many consumers anticipate spending less on both essential and discretionary items in Q3 2025. To sustain consumer engagement, especially with price-sensitive shoppers, retailers are advised to adapt to evolving preferences by offering competitive pricing and emphasizing value.
