Drop in retail sales marks a disappointing end to tough year

17 January 2025

The latest ONS retail sales figures show volumes have fallen by 0.3% in December, driven by a decline in food stores (down 1.9%), however clothing jumped 4.4% and department stores were up 1.2%.

Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, comments: “Despite record-breaking sales for some retailers over Christmas, plus the later than usual Black Friday event, it was a disappointing end to 2024 for the sector. A lacklustre Golden Quarter is particularly concerning after a tough year as retailers would have been hoping for a Christmas boost. However, retail sales excluding fuel did increase 2.9% year-on-year due to poor sales figures in December 2023. 

“Many retailers had little choice but to launch their Boxing Day discounting early to maximise sales and clear as much stock as possible ahead of the seasonal slowdown in January. However, without the ‘golden’ boost to sales many retailers will find it difficult to navigate the imminent headwinds post-Budget and we could see prominent brands struggle to compete in 2025.

“Retailers are resilient, but the constant bombardment of challenges means many are in ‘fight or flight’ mode which impacts pricing, people decisions, strategic investment and future growth. While the longer-term economic outlook is one of cautious optimism, the hope is that consumer confidence continues building. Once this happens, shoppers should return to the high street and provide a boost to retail spending, which the sector is pinning its hopes on.

“In the meantime, retailers need to focus on building on their strategy for 2025 and beyond, and how best to sustain growth. This includes ensuring they invest in digital and creating a seamless blend between online and in-store shopping experiences as consumers want the best of both worlds.”

Thomas Pugh, economist at RSM UK, added: “The weakness in retail sales volumes in December suggests that the stagnation which has gripped the UK economy since the summer continued into the final month of the year.

“Admittedly, the ONS seasonal adjustment process around Black Friday can play havoc with the retail sales data at this time of year, but even averaging November and December to take account for that, retail sales volumes dropped. The one silver lining is that the jump in clothing sales in particular could suggest that consumers are becoming more willing to make discretionary purchases.

“We still expect a rise in consumer spending this year, due to strong wage growth and a gradual decline in the saving rate, which will help drive an acceleration in GDP growth. Indeed, an interest rate cut in February should help consumer confidence and incomes rebound. But the risks are clearly building that cautious consumers choose to save rather than spend increases in income, raising the risk of weaker growth continuing through the first half of this year.”