UK retail sales jump in January, but cost pressures on the rise

(Sharecast News) - UK shoppers braced stormy weather in January to take advantage of promotional deals, according to data out on Tuesday, with sales rising strongly compared with the year before. According to the British Retail Consortium-KPMG retail sales monitor, total retail sales increased at an annual rate of 2.6% last month, down from the 3.2% year-on-year growth seen in December but well ahead of the 1.2% gain recorded in January 2024.

Results were boosted by an earlier start of the reporting period, the BRC said, which added a few more post-Christmas shopping days into the mix.

Following a 3.3% annual slump in sales in November, the three-month average growth rate stood at just 1.1%, while the 12-month average growth rate was 0.8%.

Food sales rose 2.8% year-on-year, while non-food sales were up 2.6%. Meanwhile, in-store non-food sales were 2.6% higher while online non-food gained 2.2%.

"January sales kicked off a solid month for retail with stores delivering their strongest growth in almost two years, albeit on a weak comparable," said the BRC's chief executive, Helen Dickinson.

"Consumers headed to the shops to refresh their homes for the year ahead, taking advantage of big discounts on furniture, bedding and other home accessories. With growth across nearly all categories, only toys and baby equipment remained in decline. While the bouts of stormy weather put a temporary dampener on demand, sales growth held up well throughout the rest of the month."

However, Dickinson painted an uncertain picture looking ahead, with inflationary pressures and £7bn of new costs for retailers - comprising higher national insurance contributions, a higher National Living Wage, and a new packaging levy - likely to lead to price increases and lower investment.

"Government can mitigate this by ensuring its proposed business rates reforms do not result in any shop paying more in business rates," she said.