UK Retail Sales update: was October’s fall the start of a new leg down, or just a blip in the rebound?

As Shakespeare once said about true love, so the course of UK Retail Sales never seems to run smooth. Indeed, setting aside the Covid years of 2020-2021, the last time that UK Retail sales increased for four consecutive months was ten years ago (this is based on the historic data as it exists today), in December 2014. Little surprise then that after three consecutive months of increases in July, August and September, UK Retail Sales duly slipped back a bit in October, falling 0.7% on the month.

As if the natural month-to-month volatility in retail sales isn’t enough (don’t forget the weather and school holidays, never mind promotional activity) things are complicated further on account of the Covid-related business interruptions of 2020 and 2021, and further still by the sudden inflation shock of 2022, with the significant interest increases that followed in its wake.

So where do things stand today? Was October’s fall in sales the precursor of more bad news for Retail in the coming months, or just a temporary blip on the road back to normality after seven years of Brexit uncertainty, Covid and the Cost-of-Living Crisis (spoiler alert – we think it is the latter).

In Figure 1 below, we chart yearly growth in UK Retail Sales volume in terms of the Upper and Lower 95% Confidence Intervals surrounding it (the latest reading was 2.3% growth in sales volume from October 2023 to October 2024, to which we add 1.95 times the estimated standard error of 1.6% to generate the respective Confidence Intervals shown). All of these numbers are in the bowels of the ONS website, by the way – we didn’t need to calculate any of this ourselves. When all is said and done with respect to this analysis, UK Retail sales growth in the year to October 2024, at 2.3%, was actually above its long-run average of 1.5%.

Figure 1

But while annual UK Retail Sales volume growth of 2.3% in the year to October 2024 is above its 2013-2024 average value of 1.5%, this doesn’t necessarily tell us the whole story if there are bigger negatives visible in the very latest monthly data.

To check this, we switch below to looking at monthly Retail Sales data excluding the Big Supermarkets (Tesco and the like), Petrol Stations, and Online only retailers. In a nutshell, we’re looking in Figures 2 and beyond at the sales of High-Street based retailers excluding food (ONS call this Predominantly Non-Food sales). But it’s volatile stuff at this frequency and aggregation: October’s monthly fall is certainly visible, as are the three prior monthly increases: but it’s hard to see much else beyond the background monthly noise (although this in itself tells you something).

Figure 2

Our next attempt to tidy this data up is to aggregate sales into quarterly averages, but Figure 3 shows this doesn’t achieve all that much: the numbers are still very up and down, only now every quarter as opposed to every month (for 24’Q4, we simply assume that monthly data are unchanged in November and December from their October level).

Figure 3

In fact, it is only when we switch to looking at annual growth in the quarterly data in Figure 4 below that things start to become clearer. In this view, and this includes the latest data for October, we can see the recovery in both Retail Sales values and volumes terms. And this is convergence between volume and value growth is also exactly what we would expect to see now that the month-to-month CPI volatility seen during the Cost of Living crisis is receding in the rear-view mirror.

Figure 4

In short, it will take more than October’s fall in UK Retail Sales to upend our prevailing narrative that UK Retail was in recovery mode for the majority of 2024, with further positive growth ahead in 2025 and 2026.

To bring things almost full circle, we switch back finally to our longest-term view of Predominantly Non-Food retailer sales (1993-2024). To do this, Figure 5 below shows annual growth rates averaged over five years, with the squares at the end of both lines indicating the data just for October 2024.

Figure 5

In this long-term view of the data, we can see 1996-2006 as the standout period for growth in UK High Street, non-Food Retail (these being pre-Internet shopping days, largely) with annual sales volume growth averaging 4%, and sometimes even more, for a decade. All of this came to end with the Global Financial Crisis in 2008 and the austerity that followed it. And even when the recovery finally came around 2015, High Street sales growth was noticeably more modest, in contrast to the more rapid pace of online sales growth being seen at this time. Worse still was to follow in the 2020s, at least so far, with Covid and the Cost-Of-Living Crisis.

But we think better times now lie ahead for UK Retail, what with Brexit uncertainly (2017-2019), Covid (2020-2021) and the Cost-Of-Living Crisis (2022-2023) now ALL receding in the rear-view mirror. Other crises could take their place, of course. But they would need to be of a similar magnitude to those crises recently seen in order to upend the economy to a similar degree. And we don’t see this happening. In their place, we see High Street, Non-Food sales volume growth averaging 3-4% in the coming five years, plus another 2% for growth in sales value (5-6%, in other words). Retailers will always have other things to worry about – monetising Generative AI, transitioning profitably towards Unified Commerce, and coping with any further retrenchment in global supply chains to name just three – but none of this should be impeding a return to more normal trading conditions for UK Retail in the coming five years, certainly as compared to the past five years. Indeed, if the latest data is to be believed, trading conditions (and the sales growth that should ordinarily accompany it) have largely returned to normal already.