UK high street faces worst run since financial crash as retailers warn on Budget impact

Britain's high street is facing its worst run since the 2009 financial crisis, with retail sales down for a 12th straight month, the Confederation of British Industry said in a report released on Wednesday. Updated: 07:40 BST, 26 September 2025. The CBI's Distributive Trades Survey shows declines across retailers and signals the downturn could extend into October.

The data comes as retailers grapple with rising costs from the National Insurance Contributions changes, minimum wage increases and a potential uptick in business rates, all set against a still-weaker consumer mood. Shirine Khoury-Haq, chief executive of the Co-operative Group, said: “The cost-of-living crisis is still upon us.” She added that customers remain price sensitive and that competition remains intense. The CBI noted a “real dampened consumer sentiment out there,” underscoring the fragility of the recovery as shoppers cut back on discretionary spend and firms reassess investment plans.

Industry chiefs highlighted near-term pain from the broad squeeze in consumer demand and the policy environment. Mitchell & Butlers, owner of Harvester, Toby Carvery and All Bar One, said it was forecasting a £130 million hit in 2026 because of inflation and softer sales, with weakness concentrated in London. DFS chief executive Tim Stacey said the furniture retailer faced “subdued” demand despite a potential upturn in the housing market. In the retail technology space, Marks Electrical shares dropped about 16% after shoppers pulled back on spending.

Starbucks is exploring options to shut “some” of its 520 outlets as it also pursues plans to open about 80 new stores, illustrating how multinationals are recalibrating footprints in a tougher climate. Barclays cited small firms’ lack of confidence and fears of tax hikes as major drags on investment. Its analysis suggests that if SMEs invested at the same rate as larger firms, roughly £60 billion of UK investment could be unlocked. Matt Hammerstein, Barclays’ corporate bank chief, said even modest improvements in SMEs’ appetite to invest could have transformational impacts for the economy.

The broader policy backdrop continues to weigh on sentiment. The banking group’s findings come as business groups warn that the Employment Rights Bill could complicate hiring part-time and seasonal staff, potentially curbing hiring flexibility during peak periods. In a separate assessment, Martin Sartorius, principal economist at the CBI, said: “The Government’s fiscal decisions are continuing to bite, and retailers’ struggles send a clear signal: business cannot be asked to balance the books again at the autumn Budget.”

Industry executives say the pressure is unlikely to ease soon. The CBI’s forecast points to another month of sliding sales in October as consumer confidence remains subdued, and retailers urge the Chancellor not to raise the cost burden in the Budget on November 26. The data highlight a fragile path for the sector, where cost pressures, policy changes and evolving consumer habits converge to shape a cautious outlook for the coming quarters.