UK retail sales up 2.5% as fashion drives consumer card spending

July retail sales rose 2.5% year-on-year, accompanied by "strong" consumer card spending, particularly in clothing. However, industry leaders say the growth "barely touches the sides" of the £7 billion in new costs from the latest budget.

The uptick in UK retail sales was against growth of 0.5% last July and the 12-month average growth of 1.9%, according to British Retail Consortium (BRC)-KPMG data.

BRC CEO Helen Dickinson said: "With sales growth at these levels, it is barely touching the sides of covering the £7 billion new costs imposed on retailers at the last Budget.

"If the upcoming Autumn Budget sees more taxes levied on retailers’ shoulders, many will be forced to make difficult choices about the future of shops and jobs, and ongoing pressure would push prices higher.

"Ultimately, this means more families struggling, particularly those on lower incomes, reduced consumer spending and a drag on economic growth."

Separate figures from Barclays show consumer card spending grew 1.4% year-on-year in July - up from a decline of 0.1% in June - with discretionary spending up 2.4% as changeable weather led shoppers to both sunny and rainy day activities and items.

Barclays found clothing performing strongly, up 4.2%, while growth in online retail spending excluding groceries reached 4.9%, up from 2.4% in June, as shoppers made the most of discounted items and sales events including Prime Day.

Pharmacy, health and beauty also performed strongly, up 9.8%, while continuing to benefit from the enduring post-Covid "lipstick effect" - where shoppers turn to small and affordable luxuries to boost their mood, Barclays said.

However, confidence in the strength of the UK economy dipped once again in July, falling three points month-on-month to 22%, the lowest level seen since January’s 21%.

Karen Johnson, Head of Retail at Barclays, said: "The summer sales, changeable weather and shoppers seeking the 'feel-good factor led' to a strong July for retailers, particularly among beauty, clothing and furniture stores.

"While confidence in the UK economy remains subdued, prudent money management, supported by the growing popularity of AI tools to help with budgeting, is contributing to a continued resilience in personal and household finances."