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Official statistics reveal that retail sales in the UK unexpectedly declined in November, despite the widespread Black Friday promotions. The Office for National Statistics (ONS) reported a 0.1% decrease in sales volumes last month, a surprise against the 0.4% growth predicted by analysts. This drop was accompanied by a decline in supermarket sales for the fourth consecutive month. However, sales in recent times have seen an overall increase, driven primarily by purchases in categories such as computers, clothing, and furniture.
Adding to this economic picture, a separate survey indicated a more positive sentiment among consumers as the holiday season approaches. The GfK consumer confidence survey showed that confidence in December reached a 16-month high, with households feeling somewhat more optimistic about their financial outlook for the coming year. Despite this improvement, overall consumer sentiment remains cautious. Oliver Vernon-Harcourt, Deloitte’s head of retail, commented that the recent reduction of interest rates to 3.75% might bolster shopper confidence, potentially encouraging greater spending during this critical pre-Christmas period.
There has been notable commentary regarding the impact of political and economic uncertainty on consumer behavior. The Bank of England’s business survey highlighted that consumers remain “keenly focused” on value for money and noted that the ongoing Budget discussions have discouraged some spending. AJ Bell’s head of financial analysis, Danni Hewson, observed that speculation around Budget measures unsettled shoppers at a crucial time, dampening the impact of Black Friday deals. Mark Neale, CEO of Mountain Warehouse, acknowledged that debate surrounding the Budget had adversely affected the retail sector, even though his company experienced record sales during this period. According to the ONS household survey, while 31% of adults intended to capitalize on Black Friday offers, 19% expected to spend less than they did the previous year.
In related fiscal news, the UK government’s borrowing exceeded expectations in November. Public sector net borrowing reached £11.7 billion last month, compared to the forecast of approximately £10 billion. Despite this, the figure was £1.9 billion lower than November the previous year, marking the lowest borrowing for that month in four years. The ONS attributed this reduction primarily to increased tax and National Insurance revenues. Over the financial year up to November, government borrowing stands at £132.3 billion, which is £10 billion higher than the same period last year. Contributing factors include the government’s reversal of the decision to limit winter fuel payments and increased public sector pay alongside inflation-linked benefits.
Chief Secretary to the Treasury James Murray reaffirmed the government’s commitment to reducing debt and borrowing, emphasizing that 10% of public spending goes toward debt interest, funds that could otherwise support public services. Meanwhile, shadow chancellor Mel Stride criticized the government for accumulating what he called “ever higher debt,” pointing to the scrapping of the two-child benefit cap and the abandonment of welfare reform as examples of irresponsible spending funded by borrowing. Looking ahead, Matt Swannell, chief economic adviser to the EY Item Club, stressed that achieving the Office for Budget Responsibility’s borrowing target of £138.3 billion for the current financial year would require a significant slowdown in government borrowing in the coming months
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