Retail sales growth slowed in September as rising inflation and a potentially taxing Budget weighed on households ahead of Christmas, figures suggest.

Total UK retail sales increased by 2.3% year on year in September, against growth of 2% in September 2024 and above the 12-month average growth of 2.1%, according to British Retail Consortium (BRC) and KPMG data.

Food sales were up 4.3% year on year, driven largely by inflation rather than volume growth.

The future of many large anchor stores and thousands of jobs remains in jeopardy while the Treasury keeps the risk of a new business rates surtax on the table

Helen Dickinson, British Retail Consortium

Non-food sales growth slowed to 0.7% against growth of 1.7% last September and below the 12-month average growth of 0.9%.

Online non-food sales increased by just 1% against last September's growth of 3.4% and below the 12-month average growth of 1.8%.

Milder weather meant shoppers delayed refreshing autumn and winter wardrobes, but electrical sales saw a boost due to the release of Apple's latest iPhone and watch.

Milder weather meant shoppers delayed refreshing autumn and winter wardrobes, the figures suggest (Ben Birchall/PA)

BRC chief executive Helen Dickinson said: "With the Budget looming large, and households facing higher bills, retail spending rose more slowly than in recent months.

"Rising inflation and a potentially taxing Budget is weighing on the minds of many households planning their Christmas spending.

"Retailers also face difficult decisions about investment and hiring over the golden quarter given uncertainty over business rates bills arriving in April.

"The future of many large anchor stores and thousands of jobs remains in jeopardy while the Treasury keeps the risk of a new business rates surtax on the table.

"By exempting these shops when the Budget announcements are made, the Chancellor can reduce the inflationary pressures hammering businesses and households alike."

As we enter the 'golden quarter' for the sector, retailers are planning product ranges and promotions to try and increase that rate of sales growth

Linda Ellett, KPMG

Linda Ellett, UK head of consumer retail and leisure markets at KPMG, said: "Overall sales grew in September, driven largely by household goods and increased mobile phone sales, as prominent brands launched new models.

"However, non-food sales are only growing by around 1.2% on average, indicating that spending continues to be very targeted as consumers remain cautious.

"As we enter the 'golden quarter' for the sector, retailers are planning product ranges and promotions to try and increase that rate of sales growth.

"They are also mindful that the Budget is beginning to move into view, with related detail about business rates reform and a general need for a boost to consumer confidence."

Separate figures from Barclays show consumer card spending was down by 0.7% year on year in September, a significant drop from the 0.5% growth recorded in August.

Clothing, furniture and beauty all had strong months, however, as consumers prioritised affordable "pick-me-up" purchases amid wider cutbacks.

The bank found consumer confidence in the strength of the UK, European and global economy all fell in September, to 25%, 29% and 26% respectively from 28%, 31% and 28%.

We're continuing to see cautious spending, and shoppers are consistently seeking out areas they can cut back on

Karen Johnson, Barclays

Consumers' confidence in their ability to live within their means, however, reached its highest level in more than four years at 78%, while confidence in household finances climbed to 74% - a seven-month high.

Almost half of UK adults (44%) reported making changes to their personal finances in anticipation of November's Budget.

Karen Johnson, head of retail at Barclays, said: "It is encouraging to see that UK consumers feel confident in their ability to manage their budgets, amid ongoing cost-of-living concerns.

"We're continuing to see cautious spending, and shoppers are consistently seeking out areas they can cut back on.

"However, multiple retail categories have proven to be resilient in recent months, with furniture, clothing, and beauty all remaining in growth since February of this year."

Retail spending slows as Budget looms large