Surprise rise in UK retail sales in September

Retail sales rose unexpectedly in September despite looming tax rises at the budget later this month.
Figures from the Office for National Statistics (ONS) showed that transactions increased by 0.3 per cent over the month of September following a rise of 1 per cent in August. Analysts had expected sales to contract by 0.4 per cent.
Consumers splashed out on technology equipment but cut back spending in supermarkets. Retail sales remain 0.2 per cent lower compared with before the Covid-19 pandemic.
Over the three months to September, sales increased by 1.9 per cent, the joint largest quarterly rise since July 2021.
Hannah Finselbach, senior statistician at the ONS, said: “Retail sales grew in September as tech stores reported a notable rise in sales. These were only partially offset by a poor month for supermarkets, where retailers said bad weather and households continuing to cut back on luxury food items hit sales.
“Looking at the broader picture, retail sales increased across the third quarter as a whole, with growth seen from all main shop types.”
Erin Brookes, European retail and consumer lead at Alvarez & Marsal, said: “Retailers have enjoyed three months of consecutive sales growth. Record rainfall levels and an early winter chill across parts of the country drove demand for warm clothing, while non-food growth received an additional boost from computers and telecommunications retailers.
“While consumers remain cost conscious, budgets are somewhat less strained than they were a year ago. However, consumer confidence remains fragile, particularly ahead of the autumn budget later this month, with uncertainty about the impact on household finances.”
Oliver Vernon-Harcourt, head of retail at Deloitte, said there was a “back-to-school boost” with sales of computers and additional clothing and footwear bolstering growth but he added: “Many consumers continued to hold back on purchasing big ticket items. The sale of smaller non-essential luxuries has propped up sales values.”
The rise in consumer spending comes before Rachel Reeves’s inaugural budget on October 30, when she is expected to announce tax rises and spending cuts amounting to £40 billion. Reeves and Sir Keir Starmer have insisted that tough decisions are necessary to offset higher-than-expected in-year spending inherited from the Conservatives.
The pair received criticism from fellow cabinet ministers this week after spelling out the scale of spending cuts that could be announced at the fiscal event.
Surveys have suggested that a combination of coming tax rises and the prime minister and chancellor’s downbeat framing of the UK economy since entering office in July knocked consumer confidence. GfK’s long-running consumer confidence index slid to minus 20 in September from minus 13 the previous month.
Improvements in economic conditions could further boost retail sales in the coming months. The Bank of England is tipped to lower interest rates in November and December by 25 basis points, taking the base rate down to 4.5 per cent, after inflation slipped to a three-year low of 1.7 per cent in September.
Yet Kris Hamer, director of insight at the British Retail Consortium, said: “While the growth in sales is welcome, retailers are nervously waiting for the Budget to see if they are going to be whacked by more costs, particularly trailed changes to Employer National Insurance contributions, as well as the inflationary increase to business rates coming next year. These changes would add more pressure to an industry that already pays far more than its fair share in business taxes.
“The Chancellor should use the Budget to level the playing field with other parts of the economy, introducing a Retail Rates Corrector, a 20 per cent downwards adjustment to the business rates bills of all retail properties. This would help drive investment and economic growth, supporting jobs, shops, high streets and communities.”