Retail sales rise 2.5% in July, boosted by England women's football team success and sports fans watching the Euros. However, retailers are grappling with extra costs imposed by the Labour government.

Retail sales in the UK rose 2.5% in July compared to the same month last year, driven by the Lionesses' Euros victory and sports fans glued to the TV. However, retailers are grappling with extra annual costs imposed by Labour and are struggling to cover the £7bn of new costs. Many are making job cuts and slowing hiring efforts to manage growing costs.

UK retail sales rose by 2.5% in July, according to the latest data from the British Retail Consortium (BRC), despite a challenging economic environment marked by job losses and store closures [1]. The increase was driven primarily by food sales, which grew by 3.9% year-on-year, significantly higher than the 3.3% growth in July 2024 and the 12-month average of 3.2% [1]. This growth was attributed to warm weather and a packed sporting schedule, including the Lionesses' Euros victory and other major sporting events [2].

Non-food sales also showed an increase of 1.4% year-on-year, compared to a decline of 1.8% in July 2024 and a 12-month average growth of 0.8% [1]. In-store non-food sales increased by 1.9% year-on-year, while online non-food sales remained relatively stable, growing by just 0.3% year-on-year [1]. However, the online penetration rate for non-food items decreased to 34.8% from 35.1% in July 2024, below the 12-month average of 36.7% [1].

The BRC CEO, Helen Dickinson, noted that while food sales did well early in the month, rising food inflation meant increased spending was more a result of higher prices than improved demand [1]. Fashion sales also saw early growth but deteriorated as weather worsened, while homeware and indoor furniture continued a steady recovery from last year's decline [1]. Gaming and toys sold particularly well, as nostalgic adults purchased products like Lego [1].

Retailers are facing significant challenges, including the impact of the UK government's revenue-raising budget and rising inflation [2]. The BRC warned that rising sales are not enough to fend off job losses and store closures across UK high streets. Many retailers, including budget chain Poundland and fashion brand River Island, are expected to close stores this year [2].

PepsiCo, owner of Walkers crisps, has announced plans to cut up to 560 jobs across its UK manufacturing sites, with 250 jobs at the Leicester Walkers plant facing the biggest impact [3]. This restructuring is aimed at updating PepsiCo's UK operations to mirror a new operating model introduced at some of its international locations.

References:
[1] https://www.retailsector.co.uk/674043-retail-sales-up-2-5-in-july-despite-job-losses-and-store-closures/
[2] https://www.businesstimes.com.sg/international/rising-uk-food-sales-driven-inflation-not-demand-brc
[3] https://www.thebusinessdesk.com/westmidlands/news/2101021-pepsico-considering-100s-of-uk-jobs-in-major-factory-restructure