Despite the volatile global economic climate, UK retail sales will grow in the second quarter of the year and give a positive lead-in to summer for the sector, according to a panel of retail experts.
The upbeat Q2 forecast for retail health comes from The Retail Think Tank – a group, which includes KPMG UK, who meet to provide a quarterly assessment on the state of play in the UK retail sector.
However, Retail Think Tank members caveated that growth remains limited and gradual and some retail categories will still find the coming months challenging.
Talking about the current state of consumer confidence and household finances, Linda Ellett, UK head of consumer, retail and leisure for KPMG UK, said that “while the majority of people that KPMG surveys feel financially secure, some cautious consumers are nevertheless holding back spend due to their expectations for the UK economy. Circumstances vary as to each household’s available discretionary spending, however all but a small minority have an ability to spend beyond essentials. We are seeing a gradual creeping up of monthly retail spending levels overall, but that cautious approach is limiting bigger ticket spending, benefiting more impulse categories. Travel remains the big-ticket area where spend is prioritised and, as we head toward the summer, related purchases should further boost overall retail sales.”
The group highlighted that whilst retail sales are growing month on month, it remains a mixed picture as to who is benefitting from the limited growth, including:
- the drier weather in March and April boosted some fashion retailers.
- Mother’s Day and Easter has seen gifting make a strong start of the year.
- House buying ahead of the April changes to Stamp Duty is and will continue to bring an upturn for the home and garden retail sector.
In the online space, some brands are seeing strong growth, but others in the affordable fashion end of the market are finding it challenging, with James Sawley, UK head of retail and leisure for HSBC, highlighting that “the growth of the low-cost Chinese online retailers, plus second-hand resale flying domestically, is making life very tough for some online affordable fashion brands.”
In the grocery sector, in-store is outperforming online so far in 2025 according to Mike Watkins, Head of Retailer and Business Insight for NIQ UK, as shoppers continue to shop around to get the best deals and promotional savings. Highlighting recent publicity about the potential for a supermarket ‘price war’, he said that “all food retailers have to be competitive on price, week in and week out, so this is nothing new, but after double-digit inflation and a 20% increase in food costs that consumers are still living with, any lowering of prices can only be a good thing from a consumer spending point of view.”
Charles Burton, executive director of Oxford Economics, said that “more positive global macroeconomic circumstances could give rise to improved consumer confidence and spending, but the likelihood is we will continue to see insipid growth for the remainder of this year, with retail sales and household spending gradually drifting up.”
Discussing the potential impact of tariffs on UK retailers, the group told that brands selling into the US, including those that manufacture in China, are understandably concerned about the scale of tariff and de minimis impact on their business.
James Sawley added that perception of the volatile landscape is leaving many “retailers remaining nervous about how consumer opinion about unemployment, tariffs, global slowdowns, and talk of recessions feeds through to consumer confidence and behaviour through the rest of 2025.”
