British retail sales post a strong decline in April

British retail sales declined by 1.3% in April, marking the steepest monthly drop in one year, following a 0.6% increase in March and coming in weaker than market expectations for a 0.6% decline.

A sharp fall in fuel sales—the largest monthly drop since the COVID-19 pandemic—was the main driver behind the weak April reading, reflecting the growing impact of higher energy prices amid ongoing uncertainty over developments in the Middle East.

Core retail sales, excluding fuel, fell by 1.1% month-on-month in April, compared with a 0.1% increase in the previous month and below consensus expectations of -0.3%.

Fuel sales dropped by more than 10%, while other non-food retail categories also posted notable declines during the month. The weakness was largely driven by deteriorating consumer confidence, weighed down by concerns over the economic impact of the Iran conflict on the cost of living, higher mortgage rates, and persistent pressure on household finances.

A separate survey showed a slight improvement in consumer confidence in May, rising from April’s reading—the lowest since October 2023—though sentiment remained firmly in negative territory, underscoring continued economic caution.

Meanwhile, another report released on Friday showed that UK government borrowing came in higher than expected in April, reaching £24.3 billion. This was up 25% from the same period last year and compared with £11.9 billion in March, also well above the £20.7 billion forecast. The figure marked the second-highest borrowing level for April on record, highlighting increasing fiscal pressure on Chancellor Rachel Reeves.