Insight 45 - Magazine - Page 26
Retail sentiment falls at the
sharpest rate in five years
CBI QUARTERLY DISTRIBUTIVE TRADES SURVEY
S
entiment amongst retailers fell at
the sharpest rate in five years in
May, with the net balance of firms
expecting their business situation to
deteriorate over the coming quarter,
according to the CBI’s latest quarterly
Distributive Trades Survey.
Year-on-year retail sales volumes fell in
May, a decline expected to accelerate next
month. However, online sales fared better,
with volumes rising in the year to May,
following six consecutive months of falling
or flat sales.
Against a backdrop of subdued demand,
retailers plan to reduce investment and
headcount. Retailers are expecting to
significantly scale back capital expenditure
in the next 12 months compared to the
last 12. This cautious outlook shows
only modest improvement on February's
reading, which marked its weakest point
since the onset of COVID-19 in 2020. Total
employment fell in May compared to a
year ago, with the pace of decline expected
to accelerate in June.
Key findings included:
• Year-on-year retail sales fell in May
(weighted balance of -27% from -8% in
April). Sales are expected to decline at a
faster rate next month (-37%).
• Retail sales for the time of year were
judged to be “poor” in May, but to a
lesser extent than in April (19% from
-31% in April). June sales are set to
remain below seasonal norms (-21%).
• Sentiment amongst retailers plummeted
in May at the sharpest rate in five years,
with a net balance of firms expecting
their business situation to worsen over
the coming quarter (-29% from -19% in
February).
• Retailers expect to scale back investment
plans in the next 12 months (compared
to the previous 12) to a significant extent
(-47% from -56% in February).
• Employment in retail declined at a
broadly steady rate in the year to May,
compared to the previous quarter (-15%
26
from -13% in February). Headcount is
expected to fall at a quicker pace next
month (-20%).
• Retail selling price inflation picked
up in the year to May but remained
below the long-run average for the fifth
consecutive quarterly survey (+35%
from +25% in February; long-run average
+41%). Retailers anticipate selling prices
to increase at an accelerated rate next
month (+57%).
• Total distribution sales volumes
(including retail, wholesale, and motor
trades) declined in the year to May at
the joint-fastest rate since January 2021
(-43% from -26% in April). Businesses
anticipate another strong decline in sales
for June, albeit at a slower pace (-38%).
Ben Jones, Lead Economist, CBI, said:
“This was a fairly downbeat survey and
highlights some of the challenges facing
the retail and wider distribution sector. In
contrast to other recent retail data, this
survey suggests parts of the sector are still
bIZ4BIZ INSIGHT MAGAZINE | JUNE 2025
struggling with fragile consumer demand,
though online sales seem to be holding
up better.
“Firms are also feeling the impact of
higher NICs and the National Living Wage
increase. Our quarterly survey suggests
that retailers are cutting back on hiring,
scaling back investment and expect to
increase selling prices at the fastest pace
for over a year.
“With the Spending Review on the
horizon, the government has an
opportunity to kickstart growth and
incentivise investment, whether by
reforming business rates, simplifying skills
investment through the Apprenticeship
Levy reform or expanding the Made
Smarter Programme, further enabling
digital adoption.”
In addition, data from the survey showed:
• Retail orders placed upon suppliers
declined at an accelerated rate in the
year to May (-41% from -24% in April).
Retailers expect to cut back on orders at
a steady pace in June (-42%).
• Retailers reported that stock volumes
in relation to expected demand dipped
below the long-run average in May
(+12% from +21% in April; long-run
average +17%). Stock positions are
expected to ease further next month
(+9%).
• Online retail sales volumes grew at a
strong rate in the year to May, following
six consecutive months of falling or flat
sales (+37% from -1% in April). Retailers
expect online sales to grow again next
month, but at a moderate rate (+17%).
• Wholesale annual sales volumes fell in
May at the fastest rate since June 2020
(-48% from -33% in April). Wholesalers
expect the sales decline to slow next
month (-30%).
• Motor trades annual sales volumes
contracted in May at the joint-quickest
rate since October 2022 (-65% from -50%
in April). Motor traders expect sales to
decline at the same pace in June (-65%).
