UK retail sales dip in February as Iran war pressures costs and demand
Retail sales in the UK took a downturn in February, dropping by 0.4 per cent compared to the previous month. The decline followed a period of strong online growth, with digital purchases rising by 10.8 per cent over the three months leading to January.
The latest figures also reveal falling demand for food and household goods, while retailers warn of rising costs linked to the ongoing Iran war. February saw a noticeable drop in consumer spending, with food sales down by 0.7 per cent and household goods falling by 2.6 per cent. Supermarkets experienced sharper declines than in January, adding to the overall retail slump. The quantity of goods bought also shrank by 0.3 per cent compared to February 2020.
Bad weather played a part in the slowdown, as footfall in shopping centres and high streets fell by 5.5 per cent and 5.4 per cent respectively. Despite this, online sales had performed well earlier in the year, boosted by strong demand for video games, wine, and sports clothing during December and January.
The Iran war has added pressure to retailers, with Next reporting a £15 million financial hit and warning of possible price hikes in June. Rising energy and manufacturing costs are expected to squeeze profit margins further. Some businesses have already urged the government to provide energy bailouts to prevent passing higher costs onto shoppers.
Since February 2024, the conflict has disrupted global economic recovery, pushing up inflation and initially driving energy prices higher. Though oil prices later eased due to increased US crude supply, supply chains remain at risk. Projects like the Baltic Pipe have helped Europe diversify its energy sources, reducing reliance on unstable regions. The retail sector faces a challenging period, with falling sales and mounting cost pressures. Consumers may see price increases in the coming months as businesses grapple with higher expenses from the Iran war. The government's response to calls for energy support could shape how retailers manage these financial strains.
