According to the latest distributive trades survey, retail confidence in the UK took a sharp hit in May 2025, with sentiment falling at its fastest pace in five years. A net balance of minus 29 percent of retailers expect their business conditions to worsen in the next quarter, marking a stark deterioration in outlook amid weak consumer demand and rising operational costs.

Year-over-year retail sales dropped by minus 27 percent, with expectations of a deeper minus 37 percent decline in June. This subdued performance has prompted firms to cut back on investment plans and reduce headcount drastically. Employment in the sector declined by minus 15 percent in May, with sharper job losses anticipated in the month ahead.

However, not all retail segments are faltering. Online sales rebounded strongly (37 percent), ending a six-month streak of stagnation. Yet this digital uplift may not offset declining activity across wholesale (minus 48 percent) and motor trades (minus 65 percent).

Rising input pressures, including increased National Insurance Contributions and the National Living Wage, are pushing selling prices up, anticipated to surge to 57 percent next month, their fastest rise in over a year. The latest report shows the urgent need to get the UK retail sector back on a positive track through policy support from the policymakers and businesses.

The Confederation of British Industry (CBI) produces a monthly survey (and a more detailed quarterly report) analysing the performance of the UK retail, wholesale and motor trade sector. Volume sales, orders on suppliers, sales for the time of year and stocks are all covered and the quarterly survey also covers imports, selling prices, numbers employed, investment and business situation. Financial markets tend to concentrate on the CBI's annual sales growth measure as a leading indicator of the official retail sales report.

This survey is a leading indicator of consumer spending because retailer and wholesaler sales are directly influenced by consumer buying levels. The monthly update provides a vital update on volume of sales, orders and stocks. Like the industrial survey, it carries significant weight in the formulation of economic policy at the Bank of England and within government as a highly respected barometer of high street trade. It is considered to be an advance indicator of retail sales although it is not well correlated with the official data on a monthly basis.