UK retailers report fall in sales ahead of Christmas
British retailers have suffered a slump in sales in the run-up to Christmas, and are gloomier about their prospects for the start of 2026, a new survey shows.
In another sign that the UK economy is struggling, the Confederation of British Industry has reported that retail sales volumes fell at an accelerated rate in the year to December.
This pulled the CBI’s gauge of how retail sales compared with a year earlier worsened to -44 in December from -32 in November.
The new year is expected to start on a gloomy note for the retail sector. Retailers anticipate that annual sales will fall sharply next month, with expectations at their weakest since March 2021.
The CBI’s survey was conducted between November 24 and December 11, involving 161 respondents including 60 retailers and 85 wholesalers.
Martin Sartorius, principal economist at the CBI, says:
“Retailers reported that annual sales volumes fell rapidly in December, as weak consumer confidence contributed to softer trading conditions in the lead-up to Christmas. Firms do not anticipate any relief in the new year, with sales expectations deteriorating to their weakest in over four years. The gloomy retail outlook was mirrored across the wholesale and motor trades sectors, which also expect sales to continue falling in January.
“Against a backdrop of weak trading conditions, there is a clear need for government action to lower the cost of doing business. Progressing reforms to the business rates system, lowering crippling energy costs, and finding balanced solutions to the Employment Rights Bill through secondary legislation would help restore confidence and unlock vital investment.”
This gloomy outlook comes just hours after the Office for National Statistics reported a small fall in retail sales volumes in November (see earlier post).
Key events
US consumer sentiment has risen a little this month, although Americans are still worried about affordability issues.
The University of Michigan’s final December sentiment index climbed 1.9 points to 52.9.
Joanne Hsu, director of the survey, said in a statement:
“Despite some signs of improvement to close out the year, sentiment remains nearly 30% below December 2024, as pocketbook issues continue to dominate consumer views of the economy.”
Stoxx 600 hits record high
The fabled Santa Rally appears to be breaking out in Europe’s stock markets.
The pan-European Stoxx 600 share index has just hit new all-time high, up 0.22% at 586.68 points.
Wall Street has opened higher on the final trading day of the week.
The Dow Jones Industrial Average rose by 87 points, or 0.21%, at the start of trading, with the S&P 500 up 0.33% and the tech-focused Nasdaq Composite rising by 0.5%.
Tech stocks are rising, with Oracle up 5.7%, and Micron gaining 5% after reporting strong results earlier this week.
The CBI’s distributive trades survey also found that retail sales for the time of year were judged to be “poor” in December, to a greater extent than last month.
Next month’s sales are set to similarly disappoint against seasonal norms.
UK retailers report fall in sales ahead of Christmas
British retailers have suffered a slump in sales in the run-up to Christmas, and are gloomier about their prospects for the start of 2026, a new survey shows.
In another sign that the UK economy is struggling, the Confederation of British Industry has reported that retail sales volumes fell at an accelerated rate in the year to December.
This pulled the CBI’s gauge of how retail sales compared with a year earlier worsened to -44 in December from -32 in November.
The new year is expected to start on a gloomy note for the retail sector. Retailers anticipate that annual sales will fall sharply next month, with expectations at their weakest since March 2021.
The CBI’s survey was conducted between November 24 and December 11, involving 161 respondents including 60 retailers and 85 wholesalers.
Martin Sartorius, principal economist at the CBI, says:
“Retailers reported that annual sales volumes fell rapidly in December, as weak consumer confidence contributed to softer trading conditions in the lead-up to Christmas. Firms do not anticipate any relief in the new year, with sales expectations deteriorating to their weakest in over four years. The gloomy retail outlook was mirrored across the wholesale and motor trades sectors, which also expect sales to continue falling in January.
“Against a backdrop of weak trading conditions, there is a clear need for government action to lower the cost of doing business. Progressing reforms to the business rates system, lowering crippling energy costs, and finding balanced solutions to the Employment Rights Bill through secondary legislation would help restore confidence and unlock vital investment.”
This gloomy outlook comes just hours after the Office for National Statistics reported a small fall in retail sales volumes in November (see earlier post).
Insolvencies in England and Wales slow
Some encouraging economic news: the number of companies going bust in England and Wales has dipped.
There were 1,866 company insolvencies in England and Wales in November, which is 8% less than in October and 7% lower than in November 2024.
The Insolvency Service reports that monthly company insolvency numbers so far in 2025 have been slightly higher than in 2024, but lower than in 2023, when insolvencies hit a 30-year high.
Tom Russell, president of R3, the UK’s restructuring, turnaround and insolvency trade body, says the slowdown in insolvencies could be a ‘glimmer of hope’ for businesses:
“When considered alongside a drop in the inflation rate to 3.2% and the recent cut in the interest rate to 3.75% it may give a glimmer of hope to struggling businesses in the run up to Christmas and offer business owners some cautious optimism that conditions may begin to improve next year.
“That said, company insolvency levels remain stubbornly high compared to five years ago, reflecting difficult trading conditions. In addition, the unemployment rate has reached a near six-year high of 5.1% as employers have been delaying recruitment and investment decisions. Sustained progress on inflation and employment will be key to restoring confidence in the long term.
“For hospitality businesses especially, the next few weeks could make or break their business. Many face a sharp drop-off in trade after festivities end with January bringing cashflow pressures caused by the rent quarter and potentially larger supplier, VAT and payroll tax payments reflecting a busy December. Our members typically see an increase in enquiries and distress calls from this sector early in the New Year.
“Retailers also face post-Christmas challenges, including high levels of returned goods at a time when wages and other costs still have to be met.”
The UK stock market is rather staggering towards Christmas.
The blue-chip FTSE 100 shares inded is up a mere 2 points, or 0.02%, today at 9,839 points, less than 100 points off its alltime high.
Shares in UK housebuilders and retailers are falling through, suggesting some pessimism about the economic outlook after today’s data.
AJ Bell head of financial analysis Danni Hewson says:
“The knife-edge nature of yesterday’s rate decision by the Bank of England is keeping UK stocks in check and stalled the FTSE 100’s push towards the 10,000 mark. Investors have responded to the reality that we could be approaching the end of the current rate-cutting cycle.
“This saw housebuilders lose momentum as hopes for a significant drop in mortgage costs in the coming months begin to fade away. An unexpected drop in retail sales only added to the gloom around the consumer backdrop in the UK.
Russia cuts interest rates to 16%
Just in: Russia’s central bank has cut its key interest rate by half a percentage point.
The Bank of Russia has lowered rates from 16.5% to 16%, and cautioned that economic growth was uneven across sectors, even though economic activity is growing at a “moderate pace”.
The Bank of Russia says:
The economy continues to return to a balanced growth path. Underlying measures of current price growth declined in November. However, inflation expectations have edged up in recent months. Lending activity remains high.
The Bank of Russia will maintain monetary conditions as tight as required to return inflation to the target. This means that monetary policy will remain tight for a long period. Further decisions on the key rate will be made depending on the sustainability of the inflation slowdown and the dynamics of inflation expectations.
According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.0–5.0% in 2026. Underlying inflation will reach 4% in 2026 H2. In 2027 and beyond, annual inflation will stay on target.
Germany’s economic recovery from three years of stagnation will get only a subdued start next year, its central bank has warned.
However, the Bundesbank predicts growth will pick up pace later on the back of higher government spending.
In the latest update of its economic projections, Bundesbank president Joachim Nagel says:
“While progress will be subdued initially, it will then slowly pick up.
“Starting in the second quarter of 2026, economic growth will strengthen markedly, driven mainly by government spending and a resurgence in exports.”
Elsewhere in retail, the UK’s financial services watchdog has launched an investigation into WH Smiths over the accounting error that wiped almost £600m off the company’s stock market value overnight this summer.
WH Smiths told the City this morning that the Financial Conduct Authority (FCA) has begun an investigation into the company over its compliance with UK stock market listing rules.
WH Smith also revealed it will try to take back as much as £7m in bonuses from former executives….
France in danger if 2026 deficit not contained, central bank chief warns
France’s central bank governor has warned there could be market turmoil if the country can’t bring its budget deficit down.
Francois Villeroy de Galhau has told Le Figaro that France could face a market backlash if it fails to bring its deficit within 5% of economic output next year.
Villeroy said:
“Beyond a 5% deficit, France would clearly put itself in danger.
“The apparent calm of the markets can, in my experience, turn abruptly.”
After another year of political turmoil, France’s parliament is yet to agree a full budget for 2026.
Fourteen lawmakers from the French National Assembly and Senate are set to sit down in a joint committee on Friday to try to hammer out a deal on the state budget, Politico reports.
However, forging a consensus will prove difficult given the radical disagreements between political parties and the two chambers of the French legislature on budget priorities.
One bright spot in the UK economy today is that consumer confidence has risen in the run-up to Christmas.
The closely watched Consumer Confidence Index from GfK has improved by two points in December, to minus 17.
The research showed that all five of the survey’s measures increased for the month, bouncing back from a weak November which had been impacted by pre-Budget caution.
Neil Bellamy, consumer insights director at GfK, said:
“It’s tempting to see festive cheer in December’s two-point improvement in consumer confidence.
“This is a surprise finding for the UK high street because it contrasts with the Black Friday sales slump we reported on earlier this month.”
AI likely to displace jobs, Bank of England governor warns
The governor of the Bank of England has warned that the widespread adoption of Artificial Intelligence (AI) is “likely” to displace people from jobs in a similar way seen during the Industrial Revolution.
Andrew Bailey has told Radio 4’s Today programme:
“As you saw in the Industrial Revolution, now over time, I think we can now sort of look back and say it didn’t cause mass unemployment, but it did displace people from jobs and this is important.
“My guess would be that it’s most likely that AI may well have a similar effect. So we need to be prepared for that, in a sense.”
Now, he points out that younger, inexperienced professionals are finding it difficult to secure entry-level roles due to AI.
Bailey explained:
“We do have to think about, what is it doing to the pipeline of people? Is it changing it or not?”
“I think if it’s people working with AI, I’m not sure it will change the pipeline, but I think we’re right to have a have an eye on that point.”
This morning’s borrowing figures show that the UK’s net debt-to-GDP ratio remains at levels last seen in the early 1960s:
The net debt-to-GDP ratio at the end of November 2025 was provisionally estimated at 95.6%, which is 0.3 percentage points more than a year ago.
November’s retail sales and public finances data reveal some tentative signs of improvement, says Paul Dales, chief UK economist at Capital Economics.
However, both are coming too late to make much difference to retailers in the so-called “Golden Quarter” and for the Chancellor after she tightened policy in the Budget in late-November, Dales adds.
Non-food retailers, such as department stores and clothing shops, bucked the downward trend last monh with a 1% rise in sales volumes.
The ONS says:
Department stores’ sales volumes rose, which some retailers attributed to longer Black Friday discounting, while retailers of footwear and leather goods also did well. Sales of automotive fuel recovered from last month’s fall, returning to just above September 2025 levels.
Retail sales fall as Black Friday effect fades
Retail sales across Great Britain fell in November, as cautious consumers cut back on their shopping ove the Black Friday period.
Retail sales volumes are estimated to have fallen by 0.1% in November, the Office for National Statistics reports, which may intensify fears that uncertainty ahead of the budget on 26 November cooled the economy.
Spending at non-store (online) retailers fell, while supermarket sales volumes fell for their fourth consecutive month, the ONS says, with retailers reporting low footfall. It suspects the “Black Friday effect” on the retail sector was was slightly weaker than usual.
ONS senior statistician Hannah Finselbach said:
“Retail continued to grow in the three months to November, helped by a strong performance from clothing and tech shops.
“This year November’s Black Friday discounts did not boost sales as much as in some recent years, meaning that once we adjust for usual seasonality, our headline figures fell a little on the month.
November’s drop follows a fall of 0.9% in October and a rise of 0.8% in September.
Introduction: UK government borrowing hits four-year low in November
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s government borrowing has dropped to a four-year low in November, as higher tax receipts boosted the public coffers.
The Office for National Statistics has reported that UK borrowing – the difference between total public sector spending and income – dipped to £11.7bn in November; £1.9bn less than November 2024 and the lowest for any November since 2021.
This gap narrowed thanks to a £2.5bn increase in tax receipts to £63.5bn, including increases of £1.2bn in income tax, £400m in value added tax (VAT) and £400m in corporation tax receipts.
ONS senior statistician Tom Davies says:
“Despite an increase in spending, this month’s borrowing was the lowest November for four years. The main reason for the drop from last year was increased receipts from taxes and National Insurance contributions.
“However, across the financial year to date as a whole, borrowing is higher than last year.”
However, November’s borrowing is above forecasts – economists had expected borrowing to drop to £10bn.
And so far this financial year (since April), UK government borrowing has now risen to £132.3bn, £10.0bn more than in the same period in 2024.
The agenda
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7am GMT: UK retail sales for November
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7am GMT: UK public finances for November
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10.30am GMT: Russia’s interest rate decision
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11am GMT: CBI distributive trades
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3pm GMT: US home sales for November
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3pm GMT: University of Michigan US consumer confidence index
