UK retail sales fell 0.4% in September, a sharper decline than the 0.1% drop forecast by City economists, according to the Office for National Statistics (ONS). The downturn comes as consumer confidence suffered its steepest fall since the Brexit vote in 2016, ahead of the Chancellor's inaugural Budget on 28 October.
September Sales Slump
The ONS reported that total retail sales volumes dropped 0.4% in September, following a stronger August performance which was revised upwards to 0.7% from a previously reported 0.5%. The decline was driven by a slump in non-food stores and online spending, where volumes fell 0.4%.
Businesses reported weaker sales and reduced footfall as shoppers reined in spending on non-essential items. Automotive fuel was the only major retail sector to defy the broader downturn, recording volume growth despite rising prices at the pump.
Consumer Confidence Plunges
Fresh data from GfK revealed that UK consumer confidence suffered its steepest decline since the Brexit vote in 2016. The firm's long-standing consumer confidence index plummeted 11 points to -24 in September. Neil Bellamy, consumer insights director at GfK, described it as "an extraordinary collapse" in confidence.
Paul Dales, chief UK economist at Capital Economics, said: "October's sharp fall in consumer confidence and the dip in retail sales volumes in September show that times are getting tougher for households just as the all-important festive period for retailers is just around the corner."
Budget Uncertainty and Retailer Calls
Retailers have been on uncertain ground ahead of Chancellor John Healey's inaugural Budget, scheduled for 28 October. Growing concerns over inflation and climbing interest rates have dampened consumer confidence, with businesses warning that tax cuts are now essential to stimulate spending.
Senior executives have called on the government to exempt high street retailers from the highest business rates multiplier and reverse the recent increases to employer national insurance contributions (NICs). Thierry Garnier, chief executive of B&Q owner Kingfisher, wrote in City AM that the company's provision of work experience placements for young people "depends on what the Chancellor decides in this Budget".
British consumers have been forced to absorb steeper fuel costs following the surge in oil prices triggered by the US-Iran war. The strain on fuel prices is anticipated to persist into the final quarter, with the average price of diesel across the UK hitting a record high of £2.01 per litre in early October.
