Signs of early Christmas shopping as inflation spike threatens household budgets
Retail sales rose for the first time in six months during October, according to official figures, suggesting shoppers started their hunt for Christmas gifts early as pressure intensifies on household budgets.
The Office for National Statistics (ONS) reported a 0.8% increase in volumes last month compared to September – with clothing among categories leading the way.
It said that fashion sales were just 0.5% below pre-pandemic levels, adding that “some retailers (were) suggesting that early Christmas trading had boosted sales.”
The figures showed that clothing was in high demand as winter approached
Non-food led the growth more generally, though fuel sales were down sharply to normal levels – a consequence of the end of the panic-buying saga that was prompted by a reaction to a shortage of tanker drivers to deliver supplies.
Online sales fell to lows not seen since the start of the pandemic, according to the ONS data, which will give some comfort to physical stores ahead of their busiest season of the year.
The figures are important as they are an important barometer of the economy, which is dominated by consumer spending in the UK.
It suggests some momentum after the last set of growth figures suggested a slowdown was in place as rising costs, linked to global supply chain woes and labour shortages, were having a negative effect across the economy.
Figures this week showed the rate of inflation hit its highest level for almost a decade in October – led by surging fuel and household energy costs.
The ONS figures were released as a closely-watched measure of consumer confidence edged up for the first time in four months, despite the leap in living costs.
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GfK’s index had stood at its weakest level since the early 2021 lockdowns ahead of the latest survey, carried out earlier this month at a time when fuel and energy bills were surging.
It showed people were more willing to purchase expensive items in the run-up to the key Christmas season, though the index still came in at -14.
That was up from -17 in October.
Joe Staton, GfK’s client strategy director, said views on the economy had improved despite rising inflation and the prospect of higher interest rates, although consumers were less buoyant about their personal finances.
“This weakness is important as it reflects day-to-day plans to save or spend and is a strong driver of overall UK economic growth,” Mr Staton said.
“However, one highlight for both physical and virtual retail is the seven-point jump in major purchase intentions in the run-up to Black Friday and Christmas.”
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The Bank of England earlier this month put the country on notice that an interest rate rise, to cool inflation expectations rather than prices outside its control such as oil, was on the way.
Financial markets are split on whether it will happen next month or in February, as the Bank is anxiously awaiting more data on the pace of the country’s economic recovery.
While employment figures covering last month were mostly positive following the conclusion of the furlough scheme, policymakers will be anxious not to choke off growth through a rise in borrowing costs.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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