UK High Street faces worst run in 16 years as retail sales slump ahead of Budget

The British High Street slipped deeper into a downturn, with retail sales down for the 12th consecutive month, the longest streak of declines since 2009, according to a Confederation of British Industry survey released Tuesday. The data underscore the magnitude of strain on retailers as the autumn Budget looms and concerns mount about how policy changes could affect jobs and investment.

Shoppers faced persistent price pressures, driven in part by higher National Insurance Contributions and the impact of a higher wage floor, while many store chains warned that the prospect of steeper business rates could weigh further on demand. Shirine Khoury-Haq, chief executive of the Co-operative Group, described the prevailing climate as a “cost-of-living crisis” that remains pressing for consumers and rivals alike as price competition stays intense. The CBI’s lead economist, Martin Sartorius, said the government’s fiscal decisions were “continuing to bite,” warning that retailers’ struggles send a clear signal that business should not be asked to balance the books again in the autumn Budget. The survey pointed to another month of sliding sales in October as consumer confidence darkens further.

Industry executives warned that the pressure would not ease quickly. Mitchells & Butlers, owner of Harvester, Toby Carvery and All Bar One, said it expected a £130 million hit in 2026 from inflation and weak demand, with particular softness in London. DFS Furniture flagged subdued demand despite some green shoots in the housing market. In a separate signal of investor caution, Marks Electrical saw its shares tumble after shoppers pulled back on discretionary spending. Starbucks reportedly began consulting on shutting a portion of its 520 outlets as it also pursues plans to open about 80 new cafes, highlighting a broader restructuring trend in consumer-facing brands. Barclays, in its note to clients, said small firms’ lack of confidence and fears of tax hikes were holding back billions of pounds of investment, and that even modest improvements in SMEs’ willingness to invest could have a transformative effect on the wider economy.

The report also highlighted a notable sector development tied to cyber risk. The Co-operative Group slumped to a half-year loss after sustaining a £200 million-plus hit from a cyberattack in April. The attack disrupted payments and led to empty shelves in some locations, the group said, wiping about £206 million off reported sales. In the six months to July 5, the group posted a loss of £75 million, a stark reversal from profits of £3 million in the prior year period. Co-op chair Debbie White said the organization’s balance sheet strength and the “magnificent” response of its 53,000 colleagues allowed it to maintain essential services. The company confirmed all 6.5 million members had data stolen, adding to the reputational and operational challenges faced by retailers during a period of tight consumer budgets.

Within the corporate ranks, operators across the dining and home-furnishings segments portrayed a mixed bag of demand and price pressure. Mitchells & Butlers warned that inflation would weigh on profitability next year, while DFS signaled only a cautious stabilization in demand tied to housing-market momentum. Starbucks’ strategic review, including potential closures of some stores even as the chain expands in other markets, signaled ongoing portfolio optimization as retailers navigate a fragile demand environment. Barclays’ SME-focused analysis suggested that a faster pace of investment by smaller firms could unlock substantial growth, noting that if SMEs matched the investment rate of larger corporations, roughly £60 billion in UK investment could be unlocked, underscoring the macro linkages between appetite for risk, policy stability, and capital formation.

Looking ahead, retailers said they expected another month of deteriorating sales in October, compounding the sense that consumer confidence remains fragile. Industry leaders have urged the Chancellor to avoid tax hikes or policy changes in the Budget that would further raise operating costs and dampen hiring. The Budget, set for November 26, will be closely watched for signs of how the government plans to balance the books while supporting a consumer base still grappling with the cost of living and elevated inflation.

Overall, the current environment reflects a confluence of demand weakness, policy risk, and cost pressures that have pushed the UK’s consumer-facing sector toward its sharpest sustained retreat in more than a decade. Analysts say the path to recovery will depend on stabilizing consumer sentiment, easing the tax-and-regulation burden on small businesses, and restoring confidence in investment pipelines across the retail and services sectors.