Record warm weather and an interest rate cut by the Bank of England lifted retail sales in August, according to the latest survey results. Retailers, however, are anxious about the potential impact of speculation on tax rises during the crucial pre-Christmas trading period.
Retail sales saw an increase of 3.1% year on year, with higher spending on food and drink, as well as strong sales of computers and related equipment as parents prepared their children for the new school year.
The British Retail Consortium (BRC), in collaboration with KPMG, reported that the 4.7% increase in spending on food and drink was largely due to price increases rather than consumers purchasing more products.
Food inflation was primarily driven by higher prices in staples such as beef, chocolate, and coffee.
Despite strong sales in computing and gaming, parents facing an expensive start to the new school year reduced their spending on uniforms.
Businesses are apprehensive about sales during the golden quarter, the three-month period leading up to Christmas that is crucial for many retailers’ revenues.
Helen Dickinson, the chief executive of BRC, stated, “Sunny weather and an interest rate cut helped August sales round off a solid summer. Despite a stronger summer, retailers enter the golden quarter with caution, as the later-than-expected budget could affect consumer confidence and spending due to tax speculation before Christmas.”
Last week, Chancellor Rachel Reeves announced that the budget would take place on November 26, later than many had anticipated.
August’s sales follow a 2.5% rise in July, driven by warm weather and England’s successful Euros football campaign, and a 3.1% increase in June.
The latest report also showed growth in furniture sales for the second consecutive month, as well as increased sales of home goods such as appliances, DIY products, and garden tools.
Linda Ellett, the head of consumer, retail, and leisure at KPMG, noted that sales of many home goods have been increasing since the spike in property transactions ahead of the changes to stamp duty in April.
Home appliances, accessories, DIY, and garden tools saw sales growth in August, and new product launches boosted mobile phone sales.
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In late July and August, Samsung launched two models of its Galaxy foldable phone, and Google introduced the Pixel 10.
Overall non-food sales increased by 1.8% year on year in July, marking the third consecutive monthly increase.
However, the report also found that shopper confidence fell for the third consecutive month in August, with many anticipating further food price inflation and other financial pressures.
Sarah Bradbury, the chief executive of the Institute of Grocery Distribution, stated, “The emotional burden of rising energy bills and concerns about tax hikes in the autumn budget are adding to the strain, particularly as unemployment rises. Yet, there are signs of relief, such as the cut in interest rates and easing mortgage rates, offering some financial respite.”
Source: https://www.theguardian.com/business/2025/sep/09/uk-retail-sales-tax-christmas
