UK retail sales down 32% in August, outlook still fragile: CBI

Year-over-year (YoY) retail sales volumes dropped at a weighted balance of -32 per cent in August, following a -34 per cent fall in July. Retailers expect the decline to slow next month (-16 per cent). Sales for the time of year were described as ‘poor’ at -19 per cent, worsening from July’s -10 per cent, with September forecasts also remaining weak at -20 per cent, CBI said in its latest Distributive Trades Survey.

Retail sentiment remains downbeat, though the outlook has slightly improved. The business situation is expected to deteriorate over the coming quarter at -10 per cent, a softer decline compared with May’s -29 per cent.

Investment intentions stayed subdued, with capital expenditure expected to decline -42 per cent over the next 12 months compared to -47 per cent in May, well below the long-run average of -3 per cent. Employment levels continued their decline, with headcount down -14 per cent in the year to August, similar to May’s -15 per cent, and expected to fall faster in September (-19 per cent).

Selling prices rose at their fastest pace since November 2023, at +65 per cent, up from +35 per cent in May, highlighting ongoing inflationary pressures. Retailers anticipate slower growth in September (+43 per cent).

Total distribution sales volumes, including retail, wholesale, and motor trades, dropped -28 per cent in August compared to -39 per cent in July, with expectations for a further easing to -23 per cent next month.

The online retail sales were flat (+3 per cent) but are forecast to fall steeply in September (-35 per cent). Retail orders from suppliers declined -40 per cent, down from -21 per cent in July, with a strong reduction expected next month (-32 per cent).

Stocks relative to sales strengthened to +23 per cent in August, above the long-run average of +17 per cent but are projected to soften to +16 per cent in September. Wholesale sales fell -25 per cent, improving from -32 per cent in July, while motor trades contracted at -30 per cent, better than July’s -70 per cent, though declines are set to persist, the survey added.

“Retailers endured another tough month in August, with annual sales volumes falling for the eleventh consecutive month. Weak demand and higher labour costs continue to put pressure on margins, dampening sentiment across the retail and wider distribution sector. This downbeat outlook is reflected in firms’ plans to scale back investment and hiring,” said Martin Sartorius, CBI principal economist.

“The government’s fiscal decisions are continuing to bite, and retailers’ struggles send a clear signal: business cannot be asked to balance the books again at the Autumn Budget. Building business confidence through delivery must be the priority—starting with a rethink of the Employment Rights Bill, which risks piling on unnecessary costs and holding back jobs and investment,” added Sartorius.

ALCHEMPro News Desk (SG)