British retailers saw a positive start to 2025, with January retail spending rising by 2.6% compared to the previous year, according to the British Retail Consortium (BRC). This growth was a notable improvement from the average 0.8% increase seen over the past 12 months, signaling some recovery following a challenging 2024.
Despite this positive trend, retailers are increasingly concerned about the potential impact of rising costs. The BRC highlighted that retailers will face an additional £7 billion in expenses later this year due to higher employer social security contributions, an increased minimum wage, and a new packaging levy. These cost pressures are going to force many businesses to raise prices and scale back investment in jobs and stores, according to BRC chief executive Helen Dickinson.
British Retailers See Strong Start to 2025, but Rising Costs Loom
In a separate report, Barclays revealed that January consumer spending was up 1.9% year-on-year, the most significant increase since March. However, the bank’s consumer sentiment gauge reached its lowest point since it began tracking in April, reflecting ongoing economic concerns.
The strong retail performance in January was due to weather-related disruptions that briefly affected demand. Nonetheless, Dickinson noted that sales growth remained robust throughout the rest of the month.
Looking ahead, major retailers such as Tesco, Next, and Marks & Spencer are bracing for a challenging year, with the impact of higher employment costs expected to ripple through the economy. In the final quarter of 2024, retail spending, excluding fuel, rose 1.3% annually, but the volume of goods sold declined by 2.0% when adjusted for inflation.
Sainsbury’s has already announced plans to reduce its workforce by over 3,000 roles to cope with the difficult cost environment. Meanwhile, the Bank of England has projected that inflation will rise to 3.7% by midyear, adding further uncertainty to the outlook for retailers and consumers alike.
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