UK Retail Sales See Sharpest Drop in 18 Months

Srichand Myneni

12th October 2025

Written by Srichand Myneni

British retail sales suffered their steepest monthly decline in a year and a half in May as consumers cut back on general purchases such as food and household goods amid growing signs of a cooling economy.

According to figures released Friday by the ONS, retail sales fell by 2.7% in May, significantly exceeding the 0.5% drop forecast by Reuters. This marks the largest monthly decline since December 2023 as well as reversing April’s 1.3% rise, which had been attributed to unusually sunny weather.

The downturn was mostly made up by a 5% fall in food store sales and a 2.5% decline in household goods, suggesting more cautious spending by consumers. Overall, sales volumes were 1.3% lower than in May 2024.

Furthermore, marks the first monthly fall in retail sales in 2025 and adds to mounting evidence that the UK’s economic momentum is falling away following a strong start to the year. The economy grew 0.7% in the first quarter but recent indicators point to softening demand.

“The sharp drop back in retail sales volumes adds to other evidence that the burst of economic growth in Q1 is over,” said Paul Dales, chief UK economist at Capital Economics.

On Thursday, the Bank of England opted to hold interest rates at 4.25%, but officials signalled growing concerns about a weakening labour market. The decision comes as policymakers seek to balance persistent inflation pressures with slowing growth and signs of strain on household budgets.

Meanwhile, separate data from the ONS revealed that UK government borrowing in May rose to £17.7 billion, slightly above the £17.1 billion forecast by the Office for Budget Responsibility (OBR). This was £700 million higher than borrowing in May 2024.

Public sector spending increased by £6.4 billion year-on-year, outpacing a £5.7 billion rise in tax receipts. The rise in revenue was partly driven by a £1.8 billion increase in employer national insurance contributions, stemming from changes announced in October’s Budget and implemented in Aprils.

Despite the monthly overshoot, total borrowing for the first two months of the fiscal year stood at £37.7 billion, slightly below the OBR’s forecast of £40.7 billion.

Chancellor Rachel Reeves is facing pressure to meet her fiscal rule of balancing day-to-day government spending with revenues by 2029–30, while also delivering investment in public services and economic growth.

As part of her fiscal strategy, Reeves last week announced a spending review that included a £29 billion annual boost for the NHS, while signalling cuts in other areas. Treasury chief secretary Darren Jones defended the approach, saying: “Our Plan for Change ensures people are better off by investing in health, security, and economic growth.”