Shoppers’ worries over bills and tax restrict retail spending

Retailers suffered a disappointing October as shoppers held off on purchases because of uncertainty about the budget and fears over rising energy bills, figures suggest.
Data from the British Retail Consortium and the consultancy KPMG showed that sales increased by 0.6 per cent compared with October 2023, less than half the three-month average growth rate of 1.3 per cent.
Separate numbers from Barclays showed that spending on cards rose by 0.7 per cent in October, a slowdown from a 1.2 per cent rise in September. Both figures were below the latest inflation estimate from the Office for National Statistics (ONS) of 1.7 per cent.
Retail sales were depressed by uncertainty over the scale of potential tax rises in Rachel Reeves’s budget. The chancellor raised taxes by £40 billion mainly through lifting employers’ national insurance contributions, which experts have suggested could depress wage growth and hiring.
Helen Dickinson, chief executive of the retail consortium, said: “After a good start to autumn, October’s sales growth was disappointing. After a painful budget for retailers, the hope is it will be less painful for households in the immediate term and consumer appetite will pick up in time for the Black Friday sales and festive season.
“Retailers must now grapple with over £5 billion of new costs announced by the chancellor, including in employer national insurance, business rates and the uplift in the national living wage. Managing this will hold back investment and growth in the short term, while further squeezing already-low margins and risking inflation.”
Food sales were also lacklustre, up 2.9 per cent year-on-year compared with growth of 7.9 per cent last October, and below the 12-month average growth of 4.1 per cent.
Sales of products other than food were down 0.1 per cent year-on-year over the three months to October, against a decline of 1 per cent last October, and a slight improvement on the 12-month average fall of 1.6 per cent.
Fashion sales took the biggest hit as the mild weather delayed winter purchases, but health and beauty sales remained buoyant, boosted by beauty advent calendars “flying off the shelves”, the retail consortium said.
Linda Ellett, at KPMG, said: “Speculation about the impact of the budget, a holding back of demand until Black Friday promotions and a later half-term break all impacted retail sales data over the last month. With clarity now provided by the budget and many households escaping paying increased tax from their wages, retailers will be hoping for an upturn in consumer confidence and spending.”
According to Barclays, just under half of consumers intend to curb spending on non-essential goods, with the most commonly cited items being takeaways, eating out at restaurants and drinking at pubs, bars and clubs.
In October, spending at department stores rose by 4.7 per cent and clothing purchases increased by 1.9 per cent, Barclays said. One in three consumers said that they had saved items in their online basket to see if they are discounted on Black Friday.
Official estimates of retail sales published by the ONS show that they still remain below their pre-pandemic levels, because households are more likely to save following a series of economic shocks.
Higher interest rates have made it more attractive to save rather than spend, keeping retail sales subdued. The Bank of England has raised the base rate to 5 per cent but is expected to cut it by a quarter point at its meeting this Thursday.