Rajeev Shaunak is Head of Consumer at MHA, the accountancy and advisory firm.

 

Retail sales edged up by 0.9 per cent in June, offering a modest recovery after a dismal May in which sales volumes fell 2.7 per cent. The figures suggest a tentative stabilisation in the sector, though significant headwinds remain.

Rajeev Shaunak, Head of Consumer at accountancy and advisory firm MHA, said the uplift was partly driven by seasonal factors, with warm weather drawing shoppers back to the high street. The Bank of England’s interest rate cut in May also offered a degree of respite to households, easing mortgage burdens and freeing up disposable income.

However, Shaunak warned that this improvement may represent a recalibration following recent volatility, rather than a return to pre-crisis growth. “What we are likely witnessing is a partial return to the ‘new normal’ after the retail sector was unsettled by the introduction of aggressive and retaliatory tariffs earlier in the year,” he said.

There were signs of renewed confidence in some categories, with electrical goods — previously stagnant — recording an uptick in sales. This could indicate that both households and businesses are regaining a measure of assurance following the uncertainty of recent months.

Yet underlying cost pressures continue to weigh heavily on the sector. Retailers face a cocktail of rising expenses, including higher employer National Insurance contributions, an uplift in the national minimum wage and a sharp reduction in business rates relief for the retail, hospitality and leisure sectors. The support cut — from 75 per cent to 40 per cent — took effect in April and is now beginning to bite.

“These rising costs are compressing margins, and the response from retailers is likely to be twofold,” Shaunak said. “Some may scale back fixed costs, closing stores and reducing stock levels — a path already taken by Poundland, which said in June it could shutter up to 150 of its 800 stores. Others may pass the cost burden onto consumers through higher prices, which risks dampening demand.”

While the sector has avoided a deeper slump for now, the outlook remains finely balanced — and heavily contingent on the broader economic environment.