UK markets open in 1 hour 17 minutes
  • NIKKEI 225

    +326.58 (+1.18%)

    +442.74 (+2.28%)

    +0.38 (+0.53%)

    +4.80 (+0.27%)
  • DOW

    +183.56 (+0.55%)

    +258.07 (+1.87%)
  • CMC Crypto 200

    +11.09 (+2.81%)
  • ^IXIC

    +123.45 (+1.13%)
  • ^FTAS

    -11.44 (-0.28%)

UK retail sales fall as consumers reign in spending amid cost of living crunch

Retail sales fell in August. Photo: Mike Kemp/In Pictures via Getty
Retail sales fell in August. Photo: Mike Kemp/In Pictures via Getty

UK retail sales fell in August as the rising cost of living put a further squeeze on incomes and forced consumers to reign in spending, according new analysis.

Figures from the British Retail Consortium (BRC) and KPMG found total sales increased by 1% last month, compared to a 3% rise in August 2021.

On a like-for-like (LFL) basis sales rose 0.5% from August 2021, when they increased 1.5%.

Separately, food sales jumped by 3.8% on a total basis and 3.3% on an LFL basis in the quarter to August. Non-food sales decreased by 2% on a total basis and 2.6% on an LFL basis.

Read more: Cost of living: Iceland gives £30 vouchers to pensioners

In-store sales of non-food items increased 1.4% on a total basis and 0.3% on a LFL basis since August 2021. The corresponding online figure fell by 6.1% in August, compared to a drop of 4.6% in August last year.

It comes as UK consumers are spending less as prices soar to a 40-year high and the Bank of England expects the economy to enter a recession by the end of 2022.

Read more: Food prices rising at fastest rate since 2008 as inflation surges

Analysts have warned the decline in August "represents a significant drop in sales volumes".

Helen Dickinson, CEO of the BRC, said: "Retail sales growth slowed in August compared to the previous month as consumers reined in spending amidst the spiralling cost of living.

"While inflation in retail prices is lower than general inflation at over 10%, this still represents a significant drop in sales volumes. For the first time in recent months, clothing sales were sluggish as summer events ended, and parents held back on back-to-school spending."

Chart: British Retail Consortium and KPMG
Chart: British Retail Consortium and KPMG

Don Williams, retail partner at KPMG, added: "Worryingly, August data revealed a significant fall in clothing sales — the category which has been the most robust performer this year which could signal the start of shoppers pulling back from non-essential spending.

"As consumers return from summer holidays to an 80% increase in the energy price cap, double digit inflation and Christmas just three pay cheques away, the brakes could be firmly applied on non-essential spending for most UK households.

"The storm clouds are closing in as retailers brace themselves for a fall in demand — at a time when their own margins are under pressure from rising costs."

Watch: How does inflation affect interest rates?