Retailers Struggle as Economic Fears Take Hold
High street retailers are facing their toughest period since the pandemic, with sales plummeting 5.8% year-on-year in November. According to a report by accountancy giant BDO, customers are cutting back on spending both online and in-store, with online sales down 7.8% and in-store sales falling by 5.5%. This marks the worst performance for the sector since January 2021, when retailers were battling the UK’s third national lockdown.
A Perfect Storm of Uncertainty
Sophie Michael, head of retail and wholesale at BDO, described the results as “disastrous” for the industry, which is already bracing for a £7bn hit from the Budget following Rachel Reeves’s decision to raise employers’ National Insurance. The decline in sales is attributed to a combination of factors, including the later timing of Black Friday this year and growing concerns over household spending.
Household Spending Under Pressure
Consumers are feeling the pinch, with rising energy bills and more expensive mortgage deals contributing to a sense of economic anxiety. This perfect storm of events has resulted in consumers being more cautious with their spending, with the fashion sector particularly hard hit, experiencing an 8% drop in sales compared to last year.
A Tough Road Ahead
Ms. Michael warned that retailers are facing an even tougher first quarter in 2025 if this sales trajectory continues into the final weeks of the year. The industry is already reeling from the impact of the Budget, with many retailers expecting to pay significantly more in taxes and fees.
Business Confidence Plummets
Separate figures from the CBI reveal growing caution from businesses, with private sector firms expecting activity to fall in the three months to February 2025. This is the first time this year that growth expectations have been negative, and comes after separate research from the Institute of Directors found that business confidence had plunged to its lowest level since April 2020.
Christmas Jobs Dry Up
The job market is also feeling the effects, with a sharp drop-off in the availability of Christmas jobs. Figures from job search platform Adzuna found that the number of vacancies advertised as Christmas jobs had fallen to 21,576 in November, down from 24,699 in the same month last year.
Business Leaders Sound the Alarm
Business leaders are sounding the alarm, warning that the Chancellor’s £40bn Budget tax raid will force them to curb investment, reduce jobs, and push up prices. Retailers, who are among the most vocal critics of the Budget, estimate they will be paying £7bn in extra costs following changes to employer National Insurance contributions, higher minimum wages, business rates, and a new packaging levy.
Support for Medium-Sized Businesses
In a bid to support medium-sized companies across the UK, NatWest has announced plans to create a new UK industry body, the UK Mid Market Council (MMC). The MMC will work with business ministers to address a lack of skills, planning, and local transport infrastructure, and will launch in 2025.
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