Finance
UK retail sales and consumer morale slide ahead of budget
Published by Global Banking and Finance Review
Posted on November 21, 2025
2 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 21, 2025
2 min readLast updated: January 20, 2026
UK retail sales dropped 1.1% in October, with consumer morale also falling, indicating concerns ahead of Rachel Reeves' budget announcement.
By Andy Bruce
MANCHESTER, England (Reuters) -British retail sales tumbled in October and a closely watched gauge of household sentiment fell this month, adding to signs of waning consumer spending ahead of finance minister Rachel Reeves' budget next week.
Retail sales volumes fell by 1.1% in October compared with a month before, their first month-on-month fall since May, the Office for National Statistics said on Friday.
Economists polled by Reuters had expected sales to be flat compared with the previous month. Compared with October a year ago, retail sales were just 0.2% higher, against forecasts for a 1.5% annual increase.
Sterling fell briefly against the dollar but soon recovered.
Earlier on Friday, Britain's longest-running consumer survey, from GfK, showed a broad-based drop in consumer morale this month which suggested the public was "bracing for bad news" in Reeves' budget on November 26.
"The increasingly chaotic run-up to the budget has begun to weigh on consumer spending, judging by confidence nudging down in November and weakening retail sales growth lately," said Rob Wood, chief UK economist at Pantheon Macroeconomics, a consultancy.
Separate ONS data showed higher-than-expected government borrowing last month, underscoring the scale of the challenge facing Reeves.
She is expected to need to raise 20-30 billion pounds ($26 billion-$39 billion) through higher taxes due to an expected growth downgrade from the government's budget watchdog as well as higher borrowing costs and an inability to pass planned welfare cuts through parliament.
Overall consumer spending has been subdued due to a continued high savings rate, which economists say may reflect a surge in inflation in 2022, a more recent weakening in the jobs market and concerns about tax rises in the budget.
Recent updates from major retailers have expressed nervousness about the impact of the upcoming budget on consumer sentiment, particularly for more discretionary purchases. However, supermarket Sainsbury's and food and clothing retailer Marks & Spencer were both upbeat on Christmas trading prospects.
The ONS said supermarket, clothing and mail order sales fell in October, with some retailers citing consumers delaying spending ahead of November's Black Friday discounts.
British retail sales volumes remain 3.3% lower than their pre-pandemic level of February 2020.
(Additional reporting by James Davey; editing by William Schomberg)
Consumer morale refers to the overall confidence and sentiment of consumers regarding their financial situation and the economy, influencing their spending behavior.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Discretionary spending refers to non-essential expenses that consumers can adjust based on their financial situation, such as entertainment and luxury goods.
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