UK retail sales growth cools amid fears over budget tax rises | Retail industry

Retail sales growth in the UK slowed last month as worries about inflation and tax increases in Rachel Reeves’ autumn budget put pressure on British consumers.

Total sales rose more slowly in September than in recent months, the British Retail Consortium (BRC) said in a snapshot ahead of the Chancellor’s tax and spending event next month.

Separate figures from Barclays showed card spending fell 0.7% year-on-year in September. In a survey of 2,000 people, nearly half of consumers said they had made changes to their personal finances in anticipation of Reeves’ Nov. 26 budget, and a third had built up a savings buffer, the bank said.

BRC CEO Helen Dickinson said the upcoming budget affected spending as well as mild weather conditions, while the increase in the value of food sales was mostly due to rising grocery prices.

“The potential for rising inflation and taxation is on the minds of many households as they plan their Christmas spending,” he said.

The BRC said total retail sales in the UK rose 2.3% year-on-year in September, compared with growth of 3.1% in the previous month. This was below the Office for National Statistics’ overall annual inflation reading of 3.8% in August.

Food sales showed a stronger year-on-year increase of 4.3%; but as food inflation accelerates amid a new contraction in living standards.

Non-food spending rose 0.7% year on year, falling below the 12-month average of 0.9%, as mild temperatures in the UK deterred shoppers from updating their autumn and winter wardrobes. Sales were supported by spending on electrical products following the launch of Apple’s latest iPhone and smartwatch.

Linda Ellett, head of UK consumer, retail and leisure at accounting firm KPMG, said non-food sales rose by 1.2% on average. “Spending remains very targeted as consumers remain cautious,” he said.

Reeves is expected to raise taxes in his fall budget. But business leaders warned that higher costs for companies would be passed on to consumers in the form of price increases, which would harm household finances and the economy overall.

In an intervention published late on Tuesday, the British Chamber of Commerce called on the chancellor to ignore business tax increases as companies remain depleted by higher taxes introduced in last year’s autumn budget.

BCC chief executive Shevaun Haviland said the November budget was a “make or break” moment for the UK economy. “Right now, many companies are feeling exhausted. They can’t plan ahead because they’re waiting for more tax demands to be thrown at them.”

Barclays’ 0.7% annual decline in consumer card spending in September followed 0.5% annual growth in August. Core spending fell by 2.6%, while growth in discretionary spending slowed to 0.2%.

Despite growing concerns about the Chancellor’s budget, the bank said consumer confidence that households can live within their means reached a four-year high at 78%, while confidence in personal finance remained resilient.

But he warned households to remain cautious about the possibility of higher inflation, tax increases and broader economic uncertainty.

Karen Johnson, head of retail at Barclays, said: “We remain cautious on spending and shoppers are constantly looking for areas where they can cut back. But multiple retail categories have proven resilient in recent months, with the furniture, clothing and beauty sector continuing to grow since February this year.”