UK retailers cautious as May sales balance improves

The Confederation of British Industry reported the UK retail sales balance improved to -46 in May from a record low of -68 in April, but retailers said demand remains weak and many expect to cut investment and reduce headcount.

The CBI’s monthly retail sales balance measures the gap between the share of firms reporting higher sales and those reporting declines compared with the same month a year earlier. The survey has been running since 1983.

Retailers’ expected sales for June rose to -36 from a previously forecast -60 for May. Seasonal sales for the time of year slipped to -35 from -32 in April, the weakest seasonal reading since June 2025.

Charlotte Dendy, economic surveys manager at the CBI, observed that sentiment among retailers has been negative for two years and that businesses expect to cut back further on investment while continuing to reduce headcount.

The CBI found that retailers increased prices at the slowest pace since February 2025.

The CBI’s weaker picture contrasts with official retail sales data for April, which showed retail sales volumes excluding fuel were 1.1% higher year-on-year and unchanged month-on-month. The government figures cover a broader range of outlets than the CBI survey.

The CBI report cited GfK’s consumer sentiment index, which fell to its lowest level since October 2023 in April and rose only slightly in May. Retailers flagged concerns that higher energy costs tied to the Iran conflict could squeeze household disposable incomes and increase operating expenses.

Policymakers are watching pricing data and corporate profit margins. The Bank of England plans to monitor these trends as it assesses whether interest rates may need to rise later this year to contain inflationary pressures related to energy costs.

Kingfisher, owner of B&Q and Screwfix in the UK, reported a 0.7% drop in first-quarter sales but maintained its full-year profit guidance.

The CBI survey was conducted in May and covers businesses across the UK retail sector.