UK retailers expect tough quarter as sentiment drops to five-year low
UK retailer sentiment experienced its most significant drop in five years in May 2025, as a greater number of businesses anticipate worsening conditions in the upcoming fiscal quarter.
Findings from the Confederation of British Industry’s (CBI) recent quarterly Distributive Trades Survey reveal that comparative retail sales volumes decreased during the month, with projections pointing to a still more rapid decline in June.
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In contrast, online sales saw an improvement over the same period, breaking a six-month trend of either decreasing or stagnant sales figures.
Faced with weak demand, retailers are preparing to cut back on both investment and their workforce. Plans indicate a considerable reduction in capital spending over the coming year to May 2026 compared to the preceding 12 months.
This conservative stance reflects only a slight recovery from February’s sentiment, which was at its lowest since the emergence of Covid-19 in 2020. Employment within the retail sector dropped in May 2025 year-on-year, with expectations for this downward trend to pick up pace come June.
Retail sales declined at a weighted balance of 27% year-on-year, worsening from April’s 8% drop.
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By GlobalDataRetail sales are anticipated to drop even more steeply in June – at a projected 37%.
Assessing sales for the current time of year, retailers rated May’s performance as “poor”, albeit less so than in April (19% compared to April -31%).
Expectations for June suggest that sales will continue to trail behind typical seasonal levels at -21%.
Online sales presented a contrasting picture, with an increase in volumes increasing 37% over the past year following a half-year period of stagnant or declining figures.
Retailers predict online sales will rise again in June 2025 but at a more modest pace (+17%).
During the month, retail selling price inflation continued to rise, but stayed beneath the long-term average for the fifth consecutive survey.
Retailers anticipate that next month will bring an increased rate of price inflation at 57%.
Data from the survey also revealed that orders placed with suppliers by retailers fell more sharply in May at 41%, and retailers expect to maintain this reduced level of ordering into June (-42%).
CBI lead economist Ben Jones stated: “This was a fairly downbeat survey and highlights some of the challenges facing the retail and wider distribution sector. In contrast to other recent retail data, this survey suggests parts of the sector are still struggling with fragile consumer demand, though online sales seem to be holding up better.
“Firms are also feeling the impact of higher NICs [National Insurance contributions] and the National Living Wage increase. Our quarterly survey suggests that retailers are cutting back on hiring, scaling back investment and expect to increase selling prices at the fastest pace for over a year.”
Latest data from the British Retail Consortium (BRC) – NielsenIQ shop price index revealed that overall shop price deflation in the UK remained steady at 0.1% year-on-year in May 2025, maintaining the same rate as in April and exceeding the three-month average deflation rate of -0.2%.
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