Retail sales up - but confidence weakens as Britons fear tax hikes

Daily Mail​

25-07-2025

Retail sales momentum returned last month as consumer spending and high street footfall was boosted by record-breaking June temperatures. However, confidence weakened as Britons sensed 'stormy conditions ahead' amid reports the Chancellor is considering tax hikes in the Autumn Budget. Official data published by the Office for National Statistics confirmed evidence of improved retail sales for the month, with volumes up 0.9 per cent in June after plunging 2.8 per cent in May.
The ONS attributed the boost to strong sales of drinks, both alcoholic and non-alcoholic, as well as clothes and car fuel, as England recorded its hottest June on record and the wider UK enjoyed its second warmest. However, the increase was smaller than economist forecasts of 1.2 per cent for the month, reflecting the weight an inflation rate of 3.6 per cent continue to place on British consumers.
Consumer confidence down
Separate data published on Friday further demonstrated the cautious mood that continues to hang over British consumers as they prepare for potential tax hikes in Autumn. The closely-watched GfK consumer confidence index dipped to -19 for July, from a six-month high of -18 in June. However, this is better than forecasts of a decline to -20. Economists polled by Reuters had mostly expected a reading of -20. Neil Bellamy, consumer insights director at GfK, said: 'The data suggests that some people may be sensing stormy conditions ahead.
'With speculation growing over possible tax rises in the Autumn Budget , and price pressure contributing not just to higher inflation already but also to the likelihood of worse inflation to come, the news is worrying.' Weaker consumer confidence also coincides with the 26th consecutive month of real income growth, according to Asda's income tracker, which showed 3.7 per cent for June.
Analysts at Shore Capital said: 'All things being equal, one would expect to be reflected in a loosening on customers purse strings. 'This contradiction again highlights the uncertain and fragile nature of the consumer economy in the UK at this time.
'The pressures households felt during the cost of living squeeze in 2022-23 will not be soon forgotten and so as long as the national rhetoric remains one of weak growth, high debt and higher taxes we expect households to remain nervous.' The pound fell roughly 0.3 per cent against the euro and US dollar on Friday morning, to around £1.15 and £1.35, respectively, reflecting greater expectations of a Bank of England interest rate cut next month.