British retail sales slip in July after World Cup boost

By David Milliken

LONDON, Aug 21 (Reuters) - British retail sales fell back as expected in July after a surge in June when hot weather boosted demand for fans and air conditioners and supermarkets offered promotions alongside the men's soccer World Cup, official figures showed on Friday.

Retail sales volumes last month dropped 0.5% from June, in line with economists' median forecast in a Reuters poll, while annual sales growth slowed to 1.6% in July from a downwardly revised 3.8%, slightly below expectations for a fall to 2.2%.

The biggest drag came from clothing and footwear sales, which fell by the most since May 2025, down 2.7% on the month, after many stores began summer sales in June rather than July.

Sterling was little changed against the dollar after the data, which came alongside figures showing more government borrowing than expected in July.

"July's 0.5% fall in UK retail sales volumes should probably be read as a pause rather than the start of a renewed consumer downturn," said Martin Beck, chief economist at WPI Strategy.

ROBUST CONSUMER SENTIMENT

Consumer sentiment surveys suggest demand has proven robust, despite higher energy costs caused by the U.S.-Israeli war with Iran, offering a boost to new Prime Minister Andy Burnham, who has tried to mollify voter anger about the cost of living since taking office in July.

Beck said the government's decision to remove value-added tax from household electricity bills from October was likely to boost demand later in the year, and that global energy prices looked less threatening than a few weeks ago.

But there was a risk households could worry about the prospect of higher taxes in finance minister John Healey's October budget, he said, despite Burnham's pledge to stick with Labour's promise to keep the rates of all major taxes unchanged.

GfK's long-running confidence indicator, released earlier on Friday, rose to a two-year high in August — its highest since just after Burnham's predecessor Keir Starmer came to power.

However, Jacqueline Windsor, head of retail at PwC UK, said headwinds to consumer spending were likely to strengthen later this year when regulated household energy prices look set to be increased.

"We do not expect the current run of retail sales outperformance to last into autumn and the critical run-up to Christmas," she said.

Recent updates from major British retailers have revealed mixed fortunes.

Clothing retailer Next edged up its annual profit outlook for the third time this year, with sales boosted by the country's prolonged period of hot weather.

However, sportswear and fashion retailer JD Sports issued a profit warning, though it was weakness in U.S. markets, rather than in Britain, which prompted it.

(Reporting by David Milliken; Editing by Kate Holton, Sharon Singleton and Emelia Sithole-Matarise)