Inflationary pressures on UK retail sales hit online purchases particularly hard. Non-food sales on the web dropped 3.6% in January.

UK retail sales disappointed last month as Britons facing higher household bills reined in their spending after splurging on Christmas festivities.

Total retail sales rose by 4.2% year-on-year in January, around half December’s pace and down from 11.9% growth a year earlier, the British Retail Consortium and consultancy KPMG said in a Feb. 7 report. High inflation means the rise in UK retail sales masked a much larger drop in volumes as shoppers get less for their money.

The highest inflation in decades is weighing on retailers’ margins as they attempt to shield shoppers from the full impact of cost rises. Many stores reported better-than-expected sales over Christmas. Now, consumers are battling higher household bills and more expensive mortgages as interest rates rise, leaving little money in hand for shopping.

“With ongoing cost pressures and labor shortages, increases in sales don’t convert into increases in profits or cash. As Christmas cheer subsided, retailers felt the January blues,” said Helen Dickinson, CEO at the BRC.

Inflationary pressures on UK retail sales hit online purchases particularly hard. Non-food sales on the web dropped 3.6% in January amid a revival of brick-and-mortar shopping after the pandemic. Online retailers also lost out in the run-up to Christmas, with sales falling at fast fashion houses Asos Plc and Boohoo Group Plc while online beauty and nutrition firm THG Plc cut its profit guidance.


“Consumers have started the year with a tight rein on spending as they face another period of rising costs,” said Paul Martin, UK head of retail at KPMG.

Tight rein on UK retail sales

A separate report from NielsenIQ went further, showing that grocery sales fell in volume by almost 7% in January. That’s the biggest decline in the past nine months. Shoppers bought less fresh produce, meat and poultry while sales of frozen goods grew.

More than 70% of UK households think they will be affected by the cost-of-living crisis in the first part of the year. That’s up from 54% at the end of 2022.

Consumers chose cheaper big-ticket items, skipping the premium category, and opted for energy-efficient appliances such as air fryers to help bring down their bills, according to the BRC data. In clothing, the strongest categories among UK retail sales were men’s outfits and shoes.


Separate data from Barclays showed a 9.7% rise in spending on credit and debit cards. Still, the figure includes direct debits on utility bills, which rocketed 45%.

For some retailers, the combination of weaker consumer sentiment and higher input costs is proving too much.

Stationery chain Paperchase will likely close around 100 stores in the UK. The company filed for insolvency last week and Tesco Plc stepped in to buy the brand and intellectual property. It follows collapses last year from fashion chain Joules and furniture retailer, both of which were bought by Next Plc.

“It is likely we will continue to see casualties both online and on the high street this year,” said KPMG’s Martin.


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