UK retail sales see modest Christmas rise following Budget
UK retail sales inched up slightly in December, as consumers returned to the high street for Christmas shopping after the Autumn Budget, but failed to halt an overall fall in purchases during the final quarter.
Retail sales volumes are estimated to have increased by 0.4 per cent in December, following falls of 0.1 per cent in November and 0.8 per cent in October, according to the latest data from the Office of National Statistics (ONS).
The recovery around the festive period was bolstered by a rise in online sales, with online jewellers in particular reporting growing demand for precious metals following a lull the prior month.
Supermarkets and automotive fuel sales also experienced a small rise, but non-food stores, including clothing and household goods, fell 0.9 per cent, with analysts crediting the pick up in supermarket sales to changing consumer habits.
Nicholas Found, head of commercial content at Retail Economics, said: “Households spent smarter over Christmas, particularly in grocery. Consumers leaned heavily on promotions and shifted spend from eating out to premium at-home meals.”
“Discretionary non-food categories faced a toxic mix of weak demand, lingering uncertainty following the late November Budget, and margin-eroding promotions.”
“Many retailers were forced to discount earlier and harder to defend market share, putting profitability under strain,” he added.
Quarterly tumble
Despite December’s modest rise, sales across the fourth quarter tumbled 0.3 per cent compared to the prior quarter, with both supermarkets and non-store retailers suffering from a lack of consumers.
The fall in sales was attributed to strong spending over the summer, with retailers noting that both good weather and the UEFA Women’s Euros boosted sales volumes and footfall.
Retailers also blamed weak demand for precious metals in the final month of the year and a dip in automotive sales following robust July sales for the overall decline in sales.
However, compared to the same period in 2024, sales volumes rose 2.1 per cent, while online sales jumped 8.4 per cent.
In December alone, online sales were up 11.1 per cent compared to December 2024.
Oliver Vernon-Harcourt, head of retail at Deloitte, pinned the hike in online sales to a “flurry of last-minute shopping”, but Nicholas Hyett, investment manager at Wealth Club, noted that the shift to online purchases is hurting the high street.
Hyett said: “There was no festive cheer on the high street, which continues its long slow demise… in December as shoppers increasingly look online to do their Christmas shopping.
“That is a depressingly predictable headline, and the result is companies like Claire’s, the Original Factory Shop and Russell & Bromley going into administration.”
Yearly recovery and 2026 outlook
Overall, annual sales volumes rose by 1.3 per cent in 2025, following a 0.2 per cent rise in the prior year and falls in both 2022 and 2023.
But, despite this year marking the second consecutive annual rise, volumes did not recover from the staggering 2023 fall and remained below pre-COVID levels.
Analysts noted that December’s bounce back could signal further economic recovery in the UK, with retailers likely hoping that “easing inflation and improving real incomes” will continue to restore consumer confidence, but some noted the outlook remains “tough” for many.
Thomas Pugh, chief economist at RSM UK, said: “The outlook for consumers is looking a bit tougher this year. A weakening labour market combined with still high inflation means real household incomes are likely to grow by less than 1 per cent in 2026.
“The outlook for spending hinges on whether consumers maintain their current elevated levels of saving or pare back to support consumption.
“With the household saving ratio elevated and balance sheets in aggregate looking healthy, there is plenty of room for consumers to save a little less and spend a bit more, but only if they are confident enough,” Pugh added.