British consumers pulled back from the shops in July, with retail sales volumes declining as the spending boost from the men’s football World Cup and a spell of exceptionally warm
weather faded.
Official figures showed retail sales volumes fell 0.5% month-on-month in July, matching the median forecast in a Reuters poll. The decline followed a strong June, when soaring temperatures lifted demand for fans and air-conditioning equipment while supermarket promotions tied to the World Cup encouraged additional spending.
On an annual basis, retail sales growth slowed sharply to 1.6%, down from a revised 3.8% in June and slightly below economists’ expectations of 2.2%.
The figures point to a cooling in consumer activity, although economists said they did not yet suggest a significant deterioration in household demand.
“July’s 0.5% fall in UK retail sales volumes should probably be read as a pause rather than the start of a renewed consumer downturn,” said Martin Beck, chief economist at WPI Strategy.
Clothing takes the biggest hit
The weakest performance came from clothing and footwear, where sales volumes dropped 2.7% from June — the steepest monthly decline since May 2025.
The fall was partly linked to retailers bringing forward their summer discounting. Many shops began seasonal sales in June rather than waiting until July, reducing the amount of promotional activity available to attract shoppers last month.
The pound showed little reaction to the retail figures, remaining broadly stable against the US dollar. Investors were also weighing separate data showing that the British government borrowed more than expected in July.
Consumers remain relatively resilient
Despite persistent pressure on household finances, recent surveys suggest consumer confidence has improved.
The GfK consumer confidence index climbed to a two-year high in August, reaching its strongest level since shortly after Keir Starmer became prime minister.
The resilience of households could provide some support for Prime Minister Andy Burnham’s government as it attempts to address concerns over the cost of living.
Martin Beck said the planned removal of VAT from household electricity bills from October could provide an additional boost to consumer spending later in the year. He also noted that international energy prices appeared less threatening than they had been several weeks earlier.
However, households remain exposed to political and economic uncertainty. The prospect of higher taxes in Chancellor John Healey’s October Budget could weigh on confidence, even though Burnham has pledged to maintain Labour’s commitment to keeping the main rates of taxation unchanged.
Retail analysts are also warning that the recent strength in consumer spending may prove difficult to sustain.
Jacqueline Windsor, head of retail at PwC UK, said pressure on household budgets was likely to intensify later in the year as regulated energy prices are expected to rise.
“We do not expect the current run of retail sales outperformance to last into autumn and the critical run-up to Christmas,” she said.
Retailers face an uneven outlook
Trading updates from Britain's major retailers underline the mixed picture.
Fashion and home retailer Next recently raised its annual profit forecast for the third time this year, benefiting from stronger sales during the prolonged period of hot weather.
By contrast, sportswear and fashion group JD Sports has issued a profit warning. The company's weaker outlook was driven primarily by difficulties in the US market rather than a deterioration in its British operations.
The contrasting performances suggest that while British consumers are still spending, retailers cannot assume that the momentum seen earlier in the summer will continue into the crucial autumn and Christmas shopping periods.
For the wider economy, July’s figures offer a more cautious message: household demand remains intact, but the exceptional factors that lifted spending in June are no longer providing the same support. Photo by Jonathan Billinger, Wikimedia commons.
