UK bank holidays fail to boost sales growth amid continuing inflation worries

King's coronation gives temporary bump to food sales in April

A shopper cross Oxford Street in London. Retail sales have fallen short of expectations. Bloomberg

May’s three bank holidays failed to get shoppers spending as sales growth slowed to its lowest level in six months, latest figures show.

Total UK retail sales increased by 3.9 per cent last month, against a decline of 1.1 per cent in May 2022 and below the three-month average growth of 4.7 per cent, the BRC-KPMG Retail Sales Monitor showed.

Food sales were up 9.6 per cent on a year ago, boosted by the coronation of King Charles but still not sustained across the month.

Meanwhile, growth in discretionary spending continued to tumble as the high cost of living squeezed households.

The gloom continued for online retailers with just four categories registering positive sales figures and total sales down by 3 per cent.

There was cause for some optimism, however, as brighter weather at the end of the month led to a much-needed pick-up in summer fashion sales, and in gardening and do-it-yourself products.

“With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months," said British Retail Consortium chief executive Helen Dickinson.

“But with signs that inflation has possibly peaked, retailers are hopeful that confidence will continue to improve.”

Paul Martin, UK head of retail at KPMG, said: "Retailers will be hoping that inflation levels in the wider economy continue to move in the right direction in order to boost much-needed consumer confidence.

“The wild card for the retail sector remains uncontrollable food inflation, which shows little sign of coming down in the near future, and this is having a significant knock-on effect on non-essential spending.”

Figures from Barclays show consumer card spending grew just 3.6 per cent year on year in May, down from April’s 4.3 per cent, as British residents cut back on discretionary purchases to cope with rising inflation and food prices.

But May’s long weekends provided a welcome lift to hotels, bars and clubs and the entertainment sector, while digital content and takeaways enjoyed their highest growth so far this year.

Aside from the near-record 19.1 per cent food inflation, Barclays also found that grocery spending received a boost from the coronation bank holiday weekend and Eurovision.

Spending on fuel had its third consecutive month of decline, down 10.7 per cent on last May, largely thanks to the drop in prices.

Amid continuing concerns about rising food prices, Barclays found that 65 per cent of shoppers have noticed that some products are now being sold in smaller packages or portion sizes while costing the same or more than before.

The products most frequently quoted as being affected by "shrinkflation" are chocolate, crisps, biscuits and snack bars.

In response, a fifth of consumers are switching away from products that have been shrunk by manufacturers in favour of buying in bulk, which offers better value for money.

“Consumers are still paying close attention to their everyday spending, and we are seeing growing concerns around ‘shrinkflation’ in the weekly shop," said Esme Harwood, a director at Barclays.

“Many are having to forgo discretionary purchases to offset rising food prices, with clothing and restaurants most impacted.

“However, the growth witnessed at pubs, airlines and entertainment venues shows that Brits are still finding room in the budget to enjoy nights out and holidays.”