Retail sales slump as war fears hit spending

UK retail sales fell sharply over Easter as concerns over the Iran conflict weakened consumer confidence according to data from the Confederation of British (CBI) Industry which showed its retail index dropped to minus 68 in April, the lowest level since records began in 1983.

Most retailers reported declining sales and expect conditions to worsen in May, marking the weakest outlook since the pandemic. Online and wholesale activity also declined, reflecting subdued demand and rising costs. Economists said geopolitical uncertainty and cost-of-living pressures are weighing heavily on spending. The Government has introduced targeted support for energy costs, but businesses are calling for further action to ease pressure and boost demand as conditions deteriorate.

Retail sales for the time of year were judged to be poor, with the balance falling to -32 from -23 in March. Sales volumes were also sharply lower with a balance of -68, a 16-point decline on March.

Expectations for the coming month also weakened, with May sales forecast to fall short of seasonal norms, with a balance of -43 and a sales volume balance of -60.

A weighted balance is the difference between the percentage of firms reporting an increase and those reporting a decrease.

Martin Sartoruis, Lead Economist at the Confederation of British Industry, said “Retail conditions deteriorated in April, with sales momentum weakening noticeably against a backdrop of fragile consumer confidence.

“With the economic impact of the Iran conflict becoming clearer, firms will be looking to the government to recognise that easing cost of living pressures depends on tackling the cost of doing business.”

The war in Iran, which started at the end of February, is weighing heavily on consumer sentiment worldwide. The conflict has sent global energy prices soaring, reigniting inflation fears and depressing hopes for lower interest rates. The Bank of England had been widely expected to cut Bank Rate this year prior to the outbreak of war, but swap markets are now pricing in rises.

The CBI survey also showed that online retail sales volumes had dropped sharply in April, falling at the fastest rate since January 2024 as the balance tumbled to -51 from -11 in March. Wholesale sales volumes, meanwhile, fell at a similar pace to that seen in March, shedding just one point at -32, although the pace of decline was expected to quicken next month.