Retail sales in the UK rose unexpectedly over the crucial Christmas period as shoppers proved less cautious after Rachel Reeves’s budget and splurged on festive food and silver and gold jewellery.
Sales volumes rose by 0.4 per cent in December, the Office for National Statistics (ONS) said on Friday, compared with a 0.1 per cent drop in November. Food sales increased by 2 per cent in December.
For the quarter as a whole, retail sales dipped by 0.3 per cent, reflecting declines in October and November and marking a sharp slowdown from growth of 0.6 per cent in the previous three months. The ONS said this was also partly because of a stronger third quarter for supermarkets, driven by sunny weather and the Uefa Women’s Euro 2025 tournament.
Retail bosses also blamed weeks of speculation over tax rises in the run-up to the budget in November for dampening consumer confidence in the so-called golden quarter.
Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, said: “With no major shocks to consumers in the Autumn Budget, this prompted households to loosen the reins on spending in December giving retail sales a post-budget boost. Cost-conscious consumers also took advantage of December sales as retailers pressed the button early on discounting in a bid to shift stock.
“Despite the post-budget bounce, the overall Golden Quarter was disappointing for retailers as uncertainty dragged on sales in the run up to the festive period.
“Food sales were propped up by households stocking up on festive food ahead of Christmas celebrations. Online sales also saw a boost, likely driven by emerging platforms, such as TikTok shop, which are quickly gaining momentum.
“While consumer confidence shows signs of improvement, households remain cautious – taking a saving-over-spending approach. This pain is likely to continue for retailers in the first quarter of the year, but there are hopes that consumer spending picks up in the second half of 2026, helped by easing inflation and another interest rate cut - boosting consumer confidence and spending.
“That said, retailers are set to be hit with an influx of costs rises in the form of business rates and national minimum wage from April. In an increasingly competitive market, it’s imperative they stay ahead of the game by keeping pace with emerging trends, focusing on what their target market truly values, closely monitoring their cost base and leveraging technology to create efficiencies. 2026 is the year where protecting margins becomes ever more critical for retailers’ success.”
Thomas Pugh, chief economist at RSM UK, added: “The rise in both retail sales volumes in December and consumer confidence to -16 in January is a good sign that confidence and spending should improve now that the budget and all its associated uncertainty is in the rear-view mirror. What’s more, retailers managed to increase sales without resorting to heavy discounting as annual price inflation rebounded to 1.6%.
“However, the outlook for consumers is looking a bit tougher this year. A weakening labour market combined with still high inflation means real household incomes are likely to grow by less than 1% in 2026. The outlook for spending hinges on whether consumers continue with their current elevated levels of saving or pare back on this to support consumption. With the household saving ratio elevated and balance sheets in aggregate looking healthy, there is plenty of room for consumers to save a little less and spend a bit more, but only if they are confident enough. A disruptive leadership contest, which opens the door to another round of tax increases, is a significant downside risk to confidence continuing to recover.”