UK sees tepid discretionary retail sales, fashion sees better growth

UK retailers recorded moderate discretionary sales growth ahead of the key Golden Quarter trading period in September, according to BDO’s High Street Sales Tracker (HSST) released on Friday.

Total like-for-like (LFL) retail sales, both in-store and online, rose by 3.1%. While this is below the 4.7% increase seen in the same month last year, BDO noted that the figures are not disastrous, despite discretionary spending growth remaining below inflation, which has resulted in lower sales volumes.

In-store sales were the primary driver, rising 3.7% year on year. This marked one of the highest monthly growth rates so far this year and followed August’s strong performance, when in-store sales increased at their fastest rate in two years. Online sales, by contrast, grew by just 3% in September, compared with a robust 11.6% rise in September 2024.

Among discretionary categories tracked by BDO—fashion, homewares, and lifestyle—fashion led the performance, with total LFL retail sales in the sector growing by 4%, including a 6.4% increase in-store.

Sophie Michael, Head of Retail and Wholesale at BDO, described the results as a positive trend ahead of the Golden Quarter, particularly given the challenging economic backdrop. She highlighted that the timing of the upcoming Budget, scheduled just two days before Black Friday, could have major implications for the sector.

Michael noted that last year retailers were caught off guard by higher-than-expected National Insurance hikes combined with the Budget’s impact on consumer confidence. She added that investment decisions are being deferred as businesses assess the Budget’s effect on short- and medium-term cash flows. Reports also indicate reduced orders being placed with suppliers as retailers manage spending concerns, while consumers are expected to approach purchases cautiously. Depending on the Budget’s outcome, she warned, December trading will be critical to Christmas sales results.