The UK retail sales volume gauge rose slightly to -23 in February 2025, from -24 in January, surpassing market expectations of -25. While this small improvement suggests a slight stabilization in the sector, it still reflects ongoing struggles within the retail industry.
UK CBI retail sales gauge edges up slightly
The CBI's monthly retail balance underscores the continuing challenges, with retailers pointing to weak demand and the impact of higher social security contributions in the Labour government’s autumn budget as significant factors dampening sentiment. These factors have compounded the difficulties retailers face, as consumers remain cautious and reluctant to spend despite the broader economy showing signs of resilience.
Consumer demand remains subdued
Despite wages growing faster than inflation, consumer demand remains subdued, as higher living costs continue to squeeze household budgets. The prolonged period of financial pressure, combined with lingering uncertainty about future economic conditions, has contributed to the overall stagnation in retail activity. Moreover, retailers are bracing for weaker-than-usual sales in March, partly due to Easter falling later this year, which typically leads to a shift in seasonal spending patterns and delays consumer spending on related goods.
British retailers plan to reduce investment
In a further sign of the sector's troubles, British retailers are planning to reduce investment at the sharpest pace in over five years. This reduction in investment is reflective of both weak consumer spending and rising costs, which are squeezing profitability across the industry. Retailers are becoming increasingly cautious about committing to expansion or modernization plans, given the uncertain economic environment and the pressure on margins. As these conditions persist, there is concern that the retail sector could face further challenges in the coming months, with broader economic conditions and policy changes continuing to impact both consumer behavior and business confidence.
