Retail sales make a small recovery - is this the ‘new normal’?

Rajeev Shaunak, head of Consumer at MHA, comments on June's retail sales.

Following a miserable May for retailers when month-on-month sales dropped by 2.7%, retail sales for June have risen by 0.9%, showing a partial, but not complete, recovery for the sector.

The improved retail sales can be partly attributed to seasonal factors — June was a hot and sunny month, encouraging people onto the high street and boosting sales. An interest rate cut by the Bank of England in May also lowered mortgage payments, freeing up some extra disposable income for consumers to spend in the sector.

What we are most likely seeing is a recalibration following the shock to the retail sector of the imposition of aggressive and retaliatory tariffs across the globe in the latter half of Spring, with this small recovery marking a partial return to the ‘new normal.’

Sales of electrical goods, which have been partially stagnant, have improved, perhaps signifying that businesses and households alike may be feeling more confident following the tariff uncertainty of the last few months.

However, increased business costs are hitting retailers hard and will influence the sector’s trajectory in the coming months. Increased employer National Insurance contributions and a rise in the national minimum wage have led to higher staff costs, and the retail, hospitality, and leisure sector has had its 75% discount on business rates cut to 40%. With these changes taking effect from April, we are now seeing the enduring impact this will have on the retail sector.