Retail sales in the UK unexpectedly declined in December, with supermarket food sales experiencing their worst month in over a decade, raising fresh concerns about the state of the UK economy. The Office for National Statistics (ONS) reported a 0.3% fall in sales, contrary to predictions of a 0.4% rise. While food sales plummeted, clothing stores and department shops saw an uptick in trade during the festive season.
This disappointing performance follows sluggish economic growth figures, although the International Monetary Fund (IMF) upgraded its UK growth forecast for 2025 to 1.6%, slightly higher than its earlier prediction. The weak retail data initially caused the pound to dip to $1.216 before recovering to $1.22. Additionally, expectations of a Bank of England interest rate cut next month helped lift the FTSE 100 to a record high, as government borrowing costs eased.
Supermarkets struggled in December, although major players like Tesco and Sainsbury’s reported strong trading over the festive period. Other sectors, such as clothing and footwear, recorded a 4.4% rise in sales, rebounding from previous declines. Economists described the figures as a "disappointing" end to 2024, a crucial period for retailers to maximise profits ahead of quieter months.
While Chancellor Rachel Reeves faces pressure over economic stagnation, the IMF noted the UK was among the few G7 economies with upgraded growth forecasts. However, businesses raised concerns over recent Budget measures, including higher employer National Insurance rates and increased wage costs, warning these could hinder economic recovery and consumer confidence in the coming year.