Black Friday performance essential to help recovery in retail sales

The latest ONS retail sales figures show volumes decreased by 0.7% in October, driven by a sharp fall in clothing (down 3.1%) and food sales (down 0.4%).

Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, comments: “It was a concerning start to the Golden Quarter which won’t come as good news for retailers given it’s supposed to be the start of their busiest period. With half-term falling later this year and relatively mild weather, consumers have put off buying their winter coats and boots. This has made it difficult for retailers to shift stock, particularly as many have held off spending to take advantage of Black Friday deals.

“The drop in retail sales is expected to pick up with Black Friday deals throughout November and last-minute Christmas shopping in December providing a spending boost. The Autumn Budget didn’t deal a huge blow to consumers in the form of tax rises, plus interest rates continue to come down, and the American election is now out of the way, which should help with confidence and create a clear runway for Christmas spending.

“Retailers are now facing a raft of cost increases after the Autumn Budget, including tax rises and additional compliance changes, making the remainder of the Golden Quarter crucial. With many retailers’ margins already stretched, they’ll be holding on to see how the next few months perform. However, a strong festive period alone won’t be enough for some, and they will need the government to step up and deliver further support to prevent more redundancies and closures.”

Thomas Pugh, economist at RSM UK, added: “The drop in retail sales in October is disappointing after strong consumer spending growth in Q3. But the fall looks like it was driven by the change in timing of school half-term weighing on clothing sales which fell 3.1%.

“Looking ahead, retail sales should grow through 2025 as higher consumer incomes and rising consumer confidence, which bounced back to -18 in October from -21 in September, feed through into higher spending volumes. What’s more, while headline inflation jumped from 1.7% in September to 2.2% in October, retail prices fell at an accelerated rate. Indeed, retail inflation dropped from -1.3% to -1.6%, meaning lower prices will help a rise in spending feed through into bigger increases in sales volumes.”