Retail sales across the United Kingdom recorded a modest increase in September 2025, with total sales rising by 2.3% year-on-year. While the figure was slightly higher than the 2% growth recorded in September 2024, analysts believe that the pace of consumer spending is softening in response to rising living costs, seasonal hesitation, and concerns surrounding the forthcoming Autumn Budget.
The latest retail performance data, compiled by the British Retail Consortium and covering the five weeks from 31 August to 4 October, revealed contrasting dynamics between food and non-food categories, as well as between online and in-store channels. Experts attributed much of the growth to inflation rather than an actual uptick in consumer activity, raising questions about the strength of the UK’s retail recovery heading into the critical final quarter of the year.
How did food and non-food retail categories diverge in September 2025 performance data?
Food retail emerged as the primary growth driver during the month, with sales increasing by 4.3% compared to the same period in 2024. This figure exceeded the 12-month average of 3.4% and marked a significant uptick from last year’s 2.3% growth. However, industry leaders cautioned that much of this apparent strength was due to food price inflation, not increased consumer demand.
Sarah Bradbury, Chief Executive Officer of IGD, noted that although there were some positive signals among younger, affluent shoppers—particularly in London—the majority of UK households remained cautious. She said that rising grocery bills had continued to pressure consumers, with volume growth still lagging behind value gains. Despite early attempts by grocery retailers to offer budget-friendly promotions, speculation about the Autumn Budget and the broader economic climate may be curbing consumer enthusiasm ahead of the festive season.
In contrast, non-food sales posted just a 0.7% year-on-year increase in September, falling short of both the 1.7% growth recorded in the same month last year and the 12-month average growth rate of 0.9%. While some seasonal trends and product launches briefly lifted certain segments, the broader picture indicates restrained discretionary spending.
What does the data reveal about online vs in-store spending habits this autumn?
In-store non-food sales grew by a marginal 0.5% year-on-year, up slightly from the 0.4% 12-month average but below the 0.8% recorded in September 2024. Despite being above average, this modest rise suggests that footfall is still in recovery mode and that shoppers remain selective with physical purchases.
Online non-food sales rose by 1% compared to the same month last year, a sharp slowdown from the 3.4% growth seen in September 2024. Digital shopping still maintained its overall market share, with online penetration for non-food items rising slightly to 37.6% in September from 37.2% a year earlier. This was also ahead of the 12-month average penetration rate of 37%.
Industry observers believe that while the online channel remains structurally strong, its recent performance suggests saturation in some categories and growing consumer hesitation linked to delivery fees, delayed returns, and inflation-related prioritisation of spending.
What impact did weather conditions and tech product cycles have on September sales?
Weather patterns once again played a disruptive role in seasonal retail planning. Warmer-than-expected temperatures during September led many consumers to delay purchases of autumn and winter apparel, typically a high-margin period for fashion retailers. This contributed to softer-than-usual demand for clothing and footwear, particularly in northern and suburban markets where seasonal transitions are more pronounced.
However, the launch of new tech products offered a temporary boost to electronics retailers. The release of the latest Apple iPhone and Apple Watch drove a spike in spending on electrical goods, helping offset some of the broader weakness in the non-food category. Helen Dickinson, Chief Executive of the British Retail Consortium, confirmed that electronics had performed well amid the otherwise muted backdrop, crediting the “buzz” generated by high-profile product launches.
Still, these gains were largely product-specific and not indicative of a broader consumer recovery. Analysts noted that such spikes in sales were increasingly becoming isolated events, rather than signals of underlying consumer strength.
How are retailers navigating business rates uncertainty ahead of the Autumn Budget?
With the critical “golden quarter” of retail underway, businesses are adjusting their strategies while anxiously awaiting clarity from the Chancellor’s Autumn Budget. Helen Dickinson warned that the ongoing uncertainty surrounding business rates reform is making it difficult for many retailers to plan investments, staffing, and promotions.
She said that the risk of a new business rates surtax—rumoured to be under Treasury consideration—was casting a shadow over major high street operators. Dickinson urged the Chancellor to exempt large anchor stores from any such measure, arguing that doing so would help reduce inflationary pressures on both businesses and households.
Retail leaders are especially concerned about the April 2026 business rates bills, which may be recalibrated under a new fiscal policy framework. Many large retailers have postponed key hiring and capital expenditure decisions until more concrete guidance is provided, resulting in delays to store refurbishments, hiring campaigns, and supply chain commitments.
What is the current state of investor and institutional sentiment toward UK retail?
Institutional investors are watching the sector closely as Q4 begins. While total retail sales growth remains positive, the reliance on inflationary tailwinds has become a red flag for market participants looking for signs of genuine volume recovery. With promotional activity expected to rise in October and November, investor sentiment hinges on whether margin protection can be maintained amid rising operating costs.
Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG, stated that spending patterns are becoming increasingly targeted. She noted that households are choosing to spend on specific high-value items—such as new smartphones or household goods—while delaying or forgoing lower-priority purchases. This indicates that even when consumers are willing to spend, the breadth of their purchasing activity remains narrow.
Ellett added that the retail sector’s Q4 success will depend heavily on how effectively brands and retailers tailor their offerings, promotions, and communications to tap into cautious consumer sentiment. With the Budget on the horizon, she believes the next few weeks will be critical for setting the tone for Christmas and early 2026.
Can the retail sector find stability before Christmas or will economic headwinds persist?
Looking ahead, many retailers are entering the final quarter of the year with mixed expectations. While they hope to capitalise on the traditional holiday spending surge, most are also hedging for weaker consumer sentiment and potential fiscal headwinds.
The overall picture is one of resilience tempered by economic anxiety. Retailers are cautiously optimistic but are holding back on larger decisions until the Autumn Budget is announced. Without significant policy support or a strong shift in consumer confidence, experts believe retail growth could remain fragile even during the festive peak.
Sector specialists suggest watching closely for changes in discounting patterns, early Black Friday campaigns, and shifts in promotional intensity as barometers for retailer confidence. Meanwhile, investors may increasingly favour defensive names—such as grocery-focused retailers or value-led chains—over fashion or discretionary brands that remain more exposed to sentiment shocks.
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