Cautious Optimism in UK Retail: Sales Inch Up in May, Big Events on Horizon

Image © Adobe Images


UK retail sales showed modest growth in May, sparking cautious optimism among retailers as they look ahead to major events like the Euros and the Olympics to boost consumer confidence and spending.

Total retail sales increased by 0.7% year-on-year in May, said the British Retail Consortium, a significant drop from the 3.9% growth seen in May 2023 but higher than the three-month average increase of 0.3%.

“Despite a strong bank holiday weekend for retailers, minimal improvement to weather across most of May meant only a modest rebound in retail sales last month,” Dickinson said. “Although non-food sales fell over the course of the month, the long weekend did see increased purchases of DIY and gardening equipment, as well as strong clothing sales. Growth in computing sales reached their highest levels since the pandemic, with many consumers continuing to upgrade tech bought during that period,” says Helen Dickinson, Chief Executive of the British Retail Consortium. 

Food sales increased by 3.6% year-on-year over the three months to May, a notable decrease from the 9.6% growth in May 2023. This growth is also below the 12-month average growth of 6.4%. Despite these figures, the food sector still experienced year-on-year growth for the month of May.

In contrast, non-food sales faced a decline, dropping by 2.4% year-on-year over the three months to May. This is a steep decline compared to the 0.7% growth in May 2023 and sharper than the 12-month average decline of 1.7%. In-store non-food sales saw a 2.7% decrease year-on-year over the same period, a sharp contrast to the 2.9% growth seen in May 2023, and worse than the 12-month average decline of 1.1%.

Online non-food sales offered a glimmer of hope, increasing by 1.5% year-on-year in May, reversing an average decline of 3.0% in May 2023. This growth outpaced the three-month and 12-month average declines of 1.8% and 2.6%, respectively. The online penetration rate for non-food items rose to 36.7% in May from 35.9% in May 2023, slightly higher than the 12-month average of 36.1%.

Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG, highlighted the cautious optimism in the sector. “Whilst May’s figures show barely positive increases in retail sales, with less than one per cent growth year-on-year, the impact of falling CPI—which means volumes are not declining as quickly—may help to soften the blow for hard-working retailers,” she said.

Ellett also noted the positive impact of the early bank holiday and improved weather on high street sales growth, particularly in categories like health, personal care, beauty, and computing.

Retailers are hoping for a continuation of this trend, bolstered by warmer weather and summer holiday demand. “Whilst sales growth was minimal, it could point to some signs of recovery for the sector, and retailers will be eager for that trend to continue as they carefully maintain their pricing, stock, and cost base,” Ellett added.

Looking ahead, retailers are focused on the upcoming General Election, hoping for favourable policies to boost the economy. “With the General Election date fixed, retailers will be keen to hear positive measures to help boost the economy and, in particular, signs that long-awaited changes to the business rates regime are finally on their way,” Ellett noted.

In the food and drink sector, Sarah Bradbury, CEO of IGD, highlighted stable shopper confidence and the positive impact of falling inflation. “Shopper confidence remained relatively stable this month as shoppers continue to be divided in their spending habits,” Bradbury said. She noted that grocery sales bounced back in May following a decline in April, although the rate of growth is slowing as inflation normalises.

Retailers remain optimistic about the future, anticipating that major events and improved economic conditions will help bolster consumer confidence and spending, providing a much-needed boost to the sector.