London Daily

Focus on the big picture.
Monday, Oct 26, 2026

Retail sales plunge as consumer confidence 'nears financial crisis all-time low'

Retail sales plunge as consumer confidence 'nears financial crisis all-time low'

The data, coupled with a closely-watched reading of consumer confidence, prompts a dive in the value of the pound and places the Bank of England in a tricky position as it decides whether to hike interest rates for a fourth consecutive time.

The pound has fallen sharply after several pieces of data raised fears of a slump ahead for UK economic growth, driven by surging inflation.

The market mood turned ugly when the Office for National Statistics (ONS) reported a 1.4% monthly decline in retail sales in March, led by a big drop in demand for online purchases.

There was little sign for optimism among retailers, except for the owners of garden centres and DIY shops, though the data did suggest that COVID-weary consumers shifted discretionary spending towards hospitality and attractions instead as the weather improved.

Economists had expected a 0.3% decline in sales month-on-month - and sterling dived by more than 1.5 cents against the dollar, to an 18-month low of $1.28, as investors fretted over the prospects for economic growth ahead.


The UK currency was also more than one cent off against the euro.

Adding to the gloom was data from a survey of purchasing managers showing the slowest rise in private sector output for three months in April - with record inflationary pressures and war in Ukraine hitting demand.

A closely-watched measure of consumer confidence, also covering April, delivered its second-lowest reading since records began nearly 50 years ago.

It suggests that consumer spending, the biggest contributor to the UK's GDP, is at risk of being choked off as families fret over rising bills for everyday goods and services.

ONS Director of Economic Statistics Darren Morgan said of the retails sales data: "Retail sales fell back notably in March with rises in the cost of living hitting consumers' spending.

"Online sales were hit particularly hard due to lower levels of discretionary spending.

"Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month."

It all makes for worrying reading at the Bank of England.

The GfK consumer confidence index, derived from a survey, came in at -38 - worse than economists had expected and just shy of the all-time low seen in 2008 as the global financial crisis was gathering pace.

The responses were registered at a time when we learned that inflation had hit a 30-year high of 7%.

It is forecast by the Office for Budget Responsibility to climb above 9% after the unprecedented surge in the energy price cap in April - and rises in other household bills such as mobile, water and broadband are reflected in the calculations.

The price cap is currently expected to rise further - by up to £500 - in October when the additional effects of Russia's invasion of Ukraine are included, while the retail sector expects price rises to intensify throughout 2022.

GfK reported a sharp decrease in consumers' intentions to make major purchases.

All the data will be taken into account by rate-setters at the Bank, who have signalled more caution on rising rates ahead after lifting Bank rate to 0.75% at their last meeting.

They will be anxious not to choke off economic growth through rising interest rates, which are intended to stop rising inflation expectations, such as wage hikes, rather than rising prices as the inflation has been caused by factors outside their control including energy and food costs.

Inflation, while not demand-led, is nevertheless proving more sticky and persistent than policymakers had expected and financial markets still forecast a 0.25% rate hike at the next meeting of the monetary policy committee in two weeks' time.

That is because the inflationary fires have been stoked by Russia's war against Ukraine.

However, Bank governor Andrew Bailey admitted on Thursday that policymakers were walking a tight line between tackling inflation and avoiding recession.

That is because raising borrowing costs to help ease inflationary pressures could prove counterproductive with millions of mortgage holders - those on tracker or standard variable deals - already paying more.

Russ Mould, investment director at AJ Bell, said of the situation: "The ONS' retail sales data is a wake-up call that life is going to be tough for shops - virtual or physical - in the coming months.

"Once those vastly increased energy bills hit the doormat and households take time to reassess their financial situation, there is every chance that retail sales could get even worse," he wrote.

Newsletter

Related Articles

0:00
0:00
Close
Education or Indoctrination? The Growing Debate Over Religious Participation in British Schools
Germany's Vanishing Shopfronts: The Silent Collapse of the Businesses That Built Its Cities
Transport for London Unveils Expanded Zero-Emission Bus Fleet to Meet Capital Air Quality Targets
Higher Education Institutions Face Deepening Financial Strain Amid Declining International Student Enrolment
Automotive Industry Leaders Criticize Government Tax Policies and Urge Action on Retail Consumer Confidence
Environment Agency Issues Flood Alerts Across Scottish and English Waterways Following Heavy Rainfall
Independent Audit Highlights Persistent Security Vulnerabilities Across Legacy Government Digital Portals
Northern Ireland Political Leaders Clash Over Westminster Funding Allocations Ahead of Autumn Budget
Ethnic Minorities in England Face Significant Disparities in Routine Breast Cancer Diagnosis Rates
National Police Chiefs Report Alarming Surge in Domestic Abuse Cases Fuelled by Expanding Illegal Cocaine Market
Government Announces Two Hundred and Twenty Million Pound Pothole Funding Boost for Local Highway Authorities
China Issues Formal Warning Over Potential United Kingdom Restrictions on Chinese Electric Vehicles
British Defence Ministers Sign E5 Pact to Enhance European Military Capabilities and Industrial Cooperation Within NATO
United Kingdom Business Activity Expands at Fastest Pace in Eight Months According to S&P Global Flash Survey
Chancellor John Healey Prepares Major Devolution Package and Bank Profit Surcharge Ahead of Upcoming Autumn Budget
National Health Service Consultants in England Announce Two-Day Strike Action Scheduled for November
Major Clean-Up Under Way Across Britain Following Destruction Caused by Consecutive Storms Austen and Boelo
KEY TRENDS TO WATCH
Declassified Intelligence Files Reveal British Security Services Monitored National Health Service Founder
British Government Launches Sweeping Regulatory Crackdown on High-Risk Cosmetic Procedures
Scottish National Party Demands Ban on Using Scottish Revenues to Fund English Nuclear Energy Projects
Mayor of London Initiates Landmark Pedestrianisation of Oxford Street to Revitalise Global Retail Hub
British Judges Granted Expanded Legal Powers to Punish Convicted Killers Who Refuse to Attend Sentencing
United Kingdom Poised to Miss Reduced International Aid Spending Targets Ahead of Fiscal Review
Surging Cocaine Consumption Drives Record Drug Fatalities and Rising Crime Rates Across Britain
Department of Health and Social Care Announces One Hundred and Forty Million Pound Boost for Urgent Care
British Services Sector Records Strongest Growth in Eight Months Despite Broader Economic Uncertainty
United Kingdom Retail Sales Suffer Unexpected Decline as Consumer Confidence Plummets
Greater Manchester Mayor Andy Burnham Urges National Debate on Restoring European Union Free Movement
Deep Cabinet Divisions Emerge Over Controversial Approval of North Sea Fossil Fuel Projects
United Kingdom Government Urges Citizens to Stockpile Essential Supplies in National Resilience Pivot
Storm Boelo Kills Two People and Cuts Power to Tens of Thousands Across Great Britain
Critical Software Flaw Forces Dozens of United Kingdom Government Services Offline Amid Mass Security Warnings
UK Consumer Confidence Tumbles Amid Rising Energy Costs and Global Commodity Price Pressures
North Sea Transition Authority Approves Production from Jackdaw Gas Field to Bolster Domestic Energy Security
Storm Boelo Leaves Tens of Thousands of Households Without Power Across Scotland and Northern Ireland
UK Government Launches National Be Ready Campaign Urging Households to Prepare Three Days of Emergency Supplies
Department for Environment Food and Rural Affairs Implements Stricter Water Quality Regulations for British Rivers
Welsh Government Launches Major Renewable Energy Initiative to Expand Offshore Wind Capacity Along the Coast
Northern Ireland Executive Reaches Final Agreement on Comprehensive Regional Infrastructure Modernization Plan
Office for National Statistics Reports Moderate Increase in British Retail Sales Driven by Autumn Discounts
Scottish First Minister Announces Emergency Housing Strategy to Tackle Severe Homelessness Across Urban Centers
Automotive Industry Leaders in the United Kingdom Urge Government Support for Electric Vehicle Manufacturing Transition
United Kingdom and European Union Initiate High-Level Negotiations on Post-Brexit Defense and Security Pact
National Health Service England Introduces Sweeping Digital Reforms to Reduce Hospital Waiting Lists Nationwide
Chancellor of the Exchequer Outlines Emergency Fiscal Measures to Address Local Government Funding Crises Across England
Bank of England Governor Warns of Persistent Inflation Pressures Impacting Interest Rate Decisions in the United Kingdom
UK Conservative Party Suspends Former Electoral Candidate Following Undercover Investigation
Actors and Writers Condemn British Anti Terror Legislation Targeting Activist Groups and Free Speech
Central Bank and Treasury Monitor Inflation Risks as International Monetary Fund Upgrades United Kingdom Growth Forecast
×