Strong start to the new year – EY comments on January ONS retail sales

Silvia Rindone, EY UK&I Retail Lead comments: “January sales figures had a strong start to the new year, with total UK retail sales volumes estimated to have risen by 1.7% month on month. Following a disappointing Golden Quarter, where sales struggled to gain momentum, the latest ONS data indicates a more stable foundation for retailers as they move into 2025. 

“Food store sales volumes in particular saw robust growth in January 2025, recovering from declines in recent months. However, it is important to note that, more broadly, sales volumes fell by 0.6% in the three months leading up to January 2025 compared to the three months ending in October 2024. 

“The EY ITEM Club Winter forecast predicts consumer spending will grow by 1.6%, an improvement from the 1% growth observed in 2024. However, the weaker-than-expected end to 2024 means retailers need to remain vigilant in their strategies.

“While macro trends such as growing consumer income in real terms and lower interest rates are positive news, the benefits are not being felt evenly across the retail landscape. Overall growth in the retail sector remains sluggish, masking a mix of both strong and poor performers within every retail sub-sector. Performance is highly variable and largely dependent on how well retailers have optimised their customer offerings—both digitally and physically—over recent years. Those who have not invested in their propositions are now struggling to find the space to invest further in increasingly challenging conditions.

“As retailers navigate an uncertain trading environment, it is essential they build a broader proposition that goes beyond selling products. Designing service offerings that effectively solve customer problems is one example of how they can foster loyalty and drive sales. Additionally, investing in strong brands that drive trust will be crucial for retailers looking to differentiate themselves in a competitive market.

“While January has brought a positive start to the year, the retail sector must remain agile and focused on customer-centric strategies to thrive amidst the anticipated economic challenges ahead.”