BRC: How Tariffs, Tech and Energy Bills are Impacting Retail

Retail is an important part of everyday life. But, with consumer habits constantly shifting and external factors reverberating through the industry, businesses face a battle to simply survive.  

Technology continues to have a significant impact on how people shop, with more looking to online and social media retailers such as TikTok shop. Meanwhile, costs are increasing thanks to tariffs, growing energy bills and new legislation. 

Inevitably, these costs are being passed on to consumers. In September, annual UK shop price inflation rose from 0.9% to 1.4%, according to the British Retail Consortium (BRC), at a time when shoppers are feeling the pinch. 

“With the UK Budget looming large and households facing higher bills, retail spending rose more slowly than in recent months," explains Helen Dickinson, CEO of the British Retail Consortium.

"Milder weather meant shoppers delayed refreshing autumn and winter wardrobes and growth in food sales was largely inflationary rather than volume growth. Meanwhile, electricals sales were buzzing thanks to the release of the new iPhone and Apple Watch.

“Rising inflation and a potentially taxing Budget is weighing on the minds of many households planning their Christmas spending. Retailers also face difficult decisions about investment and hiring over the 'golden quarter' given uncertainty over business rates bills arriving in April.

"The future of many large anchor stores and thousands of jobs remains in jeopardy while the Treasury keeps the risk of a new business rates surtax on the table. By exempting these shops when the Budget announcements are made, the Chancellor can reduce the inflationary pressures hammering businesses and households alike.”

Footfall shifts

The BRC's latest research examines UK retail spending covering the period 31 August to 4 October.  

In September, total retail sales increased 2.3% year on year, against a growth of 2% in September 2024. However, August had seen a growth rate of 3.1% and July had seen a 2.5% rise. Moreover, September saw a like-for-like sales growth of only 2%, as opposed to 2.9% in August.

When examining UK footfall, the BRC discovered a 1.8% decrease in September (year-on-year), down from -0.4% in August.

• High street footfall decreased by 2.5% in September YoY, down from +1.1% in August. 
• Retail park footfall saw a YoY decrease by 0.8% which was up from -1.1% in August. 
• Shopping centre footfall had a 2.0% YoY decrease in September, as opposed to 0% in August.

Part of the footfall drop was caused by London tube strikes, meaning people were unable to access their favoured retailers in person. Despite an initial boost at the beginning of September amid the 'back to school' shopping rush, poor weather and concerns over rising prices had a detrimental impact. 

Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG, comments: “Overall sales grew in September, driven largely by household goods and increased mobile phone sales, as prominent brands launched new models. However, non-food sales are only growing by around 1.2% on average, indicating that spending continues to be very targeted as consumers remain cautious.

"As we enter the ‘golden’ quarter for the sector, retailers are planning product ranges and promotions to try and increase that rate of sales growth.  They are also mindful that the Budget is beginning to move into view, with related detail about business rates reform and a general need for a boost to consumer confidence."

Shopper confidence 'remains muted'

In September, food sales saw a YoY increase of 4.3%, above the 12-month average of 3.4%. Non-food sales saw an increase of 0.7% YoY in September, compared to a growth of 1.7% in September 2024. 

In-store non-food sales increased by 0.5%, which was above the 12-months average growth of 0.4% but below the growth of 0.8% seen in September 2024.

Online non-food sales fell below the 12 month average growth of 1.8%, coming in at a growth of only 1%.

Finally, the proportion of non-food items bought online increased to 37.6% in September, increasing from 37.2% in 2024. 

Sarah Bradbury, CEO of IGD, concludes: “Shopper confidence remained muted in September, with some tentative positive signs. These were driven by young, affluent Londoners who are more confident in their financial outlook and prioritise quality over cost saving.

"Grocery value growth maintained strong year-on-year increases in September, driven by food price inflation, which remains stubbornly high. Grocery volumes continued to be sluggish with household budgets under pressure, following the steady inflation rise since the start of the year.

"Despite grocery retailers announcing early price reductions to support budget-conscious shoppers, ongoing speculation surrounding Autumn Budget announcements may temper shopper sentiment ahead of the festive period.” 

As consumers prepare for the festive season and businesses anticipate Budget announcements, shopping habits are constantly changing. 

Consumers may still be cautious, but retailers are working to draw their customers back into stores, with targeted advertisements and new product ranges taking centre stage.