New analysis by the British Retail Consortium suggests that retail sales will grow between 2.3% to 3.5% in 2023.

The past year has been characterised by low retail sales growth which has remained below current inflation, suggesting volumes were down compared to 2021. The trend is expected to continue into 2023. According to the model, food sales growth will also continue to outperform non-food categories.

Sales are expected to pick up in the second half of 2023 as inflation slows and consumer confidence improves, with growth of 3.6% to 4.7% compared with 1% to 2.3% in the first half.  The analysis suggests that while food sales growth will fall slightly in the second half of the year, this will be at a slower rate than the anticipated decline in food inflation, meaning falls in volumes will ease over the period. Meanwhile, non-food sales will move from decline to growth.

It has been an exceptionally difficult year for both consumers and retailers. At a time when many cost pressures were already increasing throughout the supply chain, the war in Ukraine pushed inflation into an upwards spiral – with energy and food prices increasing by over 10% (YoY) during the second half of 2022. During this period, as inflation peaked and the cost-of-living crisis unfolded, total retail sales growth was 2.3%. However, once inflation – rising to over 11% across the economy - is accounted for, these figures represent falls in sales volumes for both food and non-food.

Kris Hamer, Director of Insight, at the British Retail Consortium, said:
“The first half of the year is likely to challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5 billion as the government’s Energy Bill Relief Scheme comes to an end in March, putting ongoing upwards pressure on prices.

“There is cause for optimism in the second half of 2023, when we expect inflation to ease and improving consumer confidence to result in an improvement to sales growth, and corresponding volumes.”

“Despite facing huge cost pressures, retailers will continue to do all they can to keep prices affordable for their customers. The market remains very competitive, and every retailer will be striving to attract and retain customers as people continue to be discerning in their purchasing decisions.”