UK retail sales deliver surprise January volume uplift, but discounts are key

By

Sandra Halliday

Published
Feb 17, 2023

UK retail sales volumes rose a surprise, 0.5% month-on-month in January following a fall of 1.2% in December. It meant sales volumes were only 1.4% below the pre-Covid levels of February 2020.

The data from the office for National statistics (ONS) also showed that non-food sales volumes overall rose by 0.6% after a fall of 2.5% in December.

And in good news for the beleaguered online channel, non-store sales volumes rose by 2%, with January, sales promotions, boosting the figure. Clothing was one of the stronger categories online in January.

Ads

But it's very clear that the UK retail sector still faces plenty of challenges and while the month-on-month figures were better than expected, the comparisons to a year earlier don't look so buoyant. Looking at the figures in more detail, the ONS said that retail sales values rose 4.1% year-on-year, which was well below the headline inflation figure (so represented a fall in real terms), and volumes fell 5.1%. 

But focusing on the positive for now, that 0.6% monthly rise in total non-food stores sales volumes (including department stores, clothing, household and other non-food stores) came as anecdotal evidence across several sub-sectors noted that growth was boosted by January sales promotions after a relatively poor December.

Yet sales volumes were still 2.9% below their pre-coronavirus levels.

Within non-food stores, the sub-sector of ‘other’ stores reported a monthly rise in sales volumes of 3.6%, helped by strong growth in cosmetics, watches and jewellery stores.

Department stores sales volumes rose by 0.8% in January 2023, from a fall of 3.1% in December 2022. Some retailers reported sales starting as early as Christmas Eve and running until the end of January.

There was clearly some good news in the report with consumers still in a mood to spend, although that was conditional on price discounts.

So what do retail experts and analysts think of the figures? Helen Dickinson, Chief Executive of the British Retail Consortium, wasn’t impressed. She said:“Widespread January sales helped sales growth remain positive as the industry entered the New Year. Despite this, the rise in consumer spending could not keep up with the double-digit inflation rates, with another fall in retail volumes. Larger purchases were hit harder as consumers tightened their purse strings or traded down to value brands.”

Silvia Rindone, EY UK&I Retail Lead, said: “Although retail sales volumes marginally increased month-on-month in January, largely due to promotional activity, when looking at the bigger picture, sales volumes fell in the three months to January when compared with the same period last year. The backdrop of rising inflation and falling consumer confidence means today’s figures are likely to be a sign of things to come. Christmas trading updates from retailers over the last few weeks have been varied and reflect a highly pressurised market in which companies are competing for the same share of squeezed wallets amid rising costs and overheads.”