UK Retail Sees Stable September Growth Ahead of Critical Golden Quarter Amidst Budget Uncertainty

UK retailers experienced a period of moderate discretionary sales growth in September, according to BDO’s High Street Sales Tracker (HSST) released recently. This performance comes just ahead of the crucial Golden Quarter trading period, offering a mixed but generally stable outlook for the sector as it approaches the busiest time of the year.

Overall, like-for-like (LFL) retail sales, encompassing both in-store and online channels, registered a 3.1% increase. While this figure is a notable decline from the 4.7% growth observed during the same period last year, it is not deemed disastrous. A key underlying factor, however, is that discretionary spend growth continues to trail behind inflation, indicating that actual sales volumes are seeing a reduction despite the positive value growth.

A significant driver of this growth in September was the robust performance of physical stores. In-store sales saw an impressive 3.7% year-on-year growth, marking one of the highest figures recorded so far this year. This strong showing builds upon a positive trend from August, when in-store sales achieved their highest growth rate in two years, underscoring the enduring appeal and importance of brick-and-mortar retail experiences.

Conversely, the online sales channel presented a more subdued picture. September saw online sales grow by a mere 3%. This modest increase is primarily attributed to a very strong comparative base from September 2022, which had witnessed a substantial 11.6% rise in online sales. The year-on-year comparison highlights the normalization of online shopping trends after the pandemic-driven boom.

Among the discretionary categories tracked by BDO, which include fashion, homewares, and lifestyle products, fashion emerged as the standout performer. The fashion sector reported a healthy 4% growth in total LFL retail sales. Breaking this down further, in-store LFL sales within the fashion category were particularly strong, growing by an impressive 6.4% as consumers returned to physical stores for apparel purchases.

Sophie Michael, Head of Retail and Wholesale at BDO, offered insights into these results, stating, “These results will be seen as a positive trend as we move into the critical Golden Quarter, particularly given the exceptionally tough economic backdrop.” Her comments acknowledge the resilience of the retail sector in the face of ongoing economic pressures and the potential for a decent end to the year.

However, Michael also raised significant concerns regarding the timing of the Chancellor’s Budget, which is scheduled just two days before Black Friday. She warned that this could have profound implications for the retail sector, recalling how retailers were unexpectedly impacted last year by higher-than-expected National Insurance hikes and the subsequent hit to consumer confidence. The proximity of such a major economic announcement to a key trading period creates considerable uncertainty.

This uncertainty is already manifesting in business behaviour, with Michael noting, “There is no doubt that investment decisions are being deferred even further as businesses await the forthcoming Budget and understand its bearing on their short and medium term cashflows.” Additionally, reports suggest a reduction in orders being placed with suppliers as retailers express anxiety over future spending levels. Consumers, too, are expected to approach their spending with caution due to the speculation surrounding the Budget. Depending on the outcome, December’s trading results will be absolutely critical to the overall Christmas trading period.