Retail spending rose sharply in January as consumers flocked to post-holiday sales, providing some relief to a sector hit by a subdued holiday season and rising labor costs.
Figures from the British Retail Consortium (BRC) and KPMG showed retail sales rose 2.7 percent year-on-year last month, compared with growth of just 1.2 percent in December.
The improvement suggests many shoppers delayed spending before Christmas and instead waited for deeper discounts in January.
Helen Dickinson, chief executive of the BRC, said: “A dreary December gave way to a brighter January as retail sales picked up pace. Many shoppers had held off Christmas spending and waited for January sales, with the start of the new year showing the strongest growth.”
Linda Ellett, UK head of consumer, retail and leisure at KPMG, said the discounts had proved crucial. “January sales enticed consumers to purchase, with personal electronics, furniture and children’s clothing and toys among the best-performing categories,” she said.
She added that New Year’s resolutions also drove up spending in health-related categories, including wellness-focused food and drinks.
Grocery sales rose 3.8 percent from January last year, compared with annual growth of 2.8 percent previously. Non-food sales rose 1.7 percent year-on-year.
However, the data will provide limited comfort to retailers worried about margins. The use of deep discounting to stimulate demand suggests that underlying consumer confidence remains fragile.
According to the Office for National Statistics, retail sales are still 1.5 percent below pre-pandemic levels. Official figures showed sales rose just 0.4 percent in December.
Consumer spending is a key driver of Britain’s economic growth and weak retail demand has weighed on GDP since the pandemic as households struggled with rising living costs and higher borrowing rates.
Financial markets expect the Bank of England to cut interest rates two or three times this year, possibly as early as March. Rates were cut four times in 2025 to 3.75 percent, the lowest level in three years.
The bank’s latest forecasts suggest inflation is likely to return to its 2 percent target by spring. However, the central bank also expects unemployment to rise to 5.3 percent this year, a high since the pandemic, potentially denting consumer confidence.
Retailers are also struggling with higher operating costs after the Labor government increased employers’ national insurance contributions by £25 billion and further increased the minimum wage.
With official GDP data for the final quarter of last year expected later this week, January’s recovery offers early signs of resilience – but the sector’s recovery remains closely tied to interest rates, household incomes and the strength of consumer confidence in the coming months.
