UK Retail Downturn Eases, but Relief Seen as Brief

The CBI retail sales balance improved to -17 in January 2026 from -44 in December, the strongest reading since April 2025 and well above expectations of -35. The latest survey suggests the severe slowdown seen across UK retailers has moderated, although conditions remain challenging overall. Retailers’ outlook for the month ahead also became less negative, with the expectations balance rising to -30 from -57. Despite the improvement, the CBI cautioned that the rebound is unlikely to last, with sales projected to weaken again next month. The group said low consumer confidence and cautious spending habits continue to restrain demand.

The CBI’s retail sales balance fell to a six-month low of -44 in December 2025 from -32 in November, below market expectations of -30. Retail sales volumes declined at the fastest pace in six months, extending a prolonged downturn that has persisted since mid-2023, with conditions expected to worsen further in January as the balance drops to -57, the weakest outlook since March 2021. Sales were widely judged to be poor for the time of year, underscoring a disappointing Christmas trading period amid fragile consumer confidence. Online sales also slipped back into contraction after two months of growth, while wholesale sales fell at their steepest rate since June 2020. Across the broader distribution sector, including retail, wholesale and motor trades, sales volumes recorded their sharpest decline in more than five years. The survey points to a bleak start to 2026, with firms citing weak demand and high operating costs.

The Confederation of British Industry’s retail sales balance fell to –32 in November 2025 from –27 in October, undershooting market expectations of –30. This marked the sharpest drop in confidence in 17 years and signaled a deeper contraction in retail activity, extending a period of weakness that has persisted since mid-2023 ahead of the 26 November annual budget. Retailers expect demand to remain muted heading into December, with sales projected to decline again, though at a slightly slower rate. Business sentiment deteriorated sharply, worsening to its lowest level in 17 years, and firms anticipate their operating conditions will continue to weaken over the coming quarter. Capital expenditure is expected to fall, with investment intentions still depressed by historical standards. Employment also declined, and retailers expect headcount to shrink at a marginally faster pace next month. On the price front, retail selling price inflation eased closer to its long-run average.