A modest rise in UK retail sales in March is expected to prove short-lived, analysts said, as escalating geopolitical tensions and mounting cost pressures threaten to dampen consumer confidence and spending in the months ahead.
According to the latest data from the Office for National Statistics (ONS), retail sales volumes increased by 0.7 per cent in March, driven primarily by stronger performance in non-store retailing, which rose 1.4 per cent, and clothing and footwear, up 1.2 per cent.
Industry experts, however, have cautioned that the uplift reflects temporary factors such as improved weather and seasonal demand, rather than a sustained recovery in consumer appetite.
Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, noted that warmer conditions encouraged spending on “feel good” categories including fashion, health and beauty, but warned that the broader outlook remains challenging.
“The 20 per cent jump in fuel prices alone since the start of the war is enough to hit consumer confidence, which fell again from -21 in March to -25 in April. Unfortunately, there are more headwinds to come, as the cumulative effect of a rise in energy costs and inflation, plus increased nervousness, causes consumers to pull back on spending,” she said.
Supporting this view, Thomas Pugh, chief economist at RSM UK, highlighted that much of March’s growth was driven by a 6.1 per cent month-on-month surge in fuel sales, suggesting consumers brought forward purchases ahead of anticipated price rises. Excluding fuel, sales volumes rose by just 0.2 per cent, underlining the fragility of underlying demand.
Looking ahead, Pugh warned that April is likely to reflect a sharper slowdown, as declining confidence and rising household costs take hold. Higher mortgage payments and an impending increase in the utility price cap are expected to further squeeze disposable incomes, potentially leaving households up to £150 a month worse off compared with earlier in the year.
“Given real household disposable income was set to grow by less than 1 per cent this year anyway, a sharp increase in inflation would see real incomes stagnate or even shrink once again,” he said.
While elevated savings levels may provide some short-term cushioning, analysts believe prolonged uncertainty will ultimately force consumers to reassess spending habits.
Retail Economics echoed these concerns, describing March as “the calm before a tougher spring”. It noted that while targeted demand remains in categories offering clear value and relevance, the market is increasingly defined by cautious, selective spending. Retailers now face intensifying pressure from rising input costs, weakening confidence and tighter margins.
“The winners will be those combining sharp value with genuine differentiation and disciplined execution,” said Nicholas Found, head of commercial content at Retail Economics, adding that unlocking demand will require precise alignment with consumer priorities.
Meanwhile, concerns are mounting over cashflow pressures within the sector. Justin Parr, chief credit officer at trade finance provider Treyd, pointed to rising insolvencies and excess stock levels as key risks, particularly for businesses that failed to clear inventory before the geopolitical crisis escalated.
“Every retailer is now on high alert about the state of consumer confidence in the UK. They will hope that, rather than pausing spending, shoppers show resilience in the face of uncertainty,” Parr observed.