The UK retail sector is a cornerstone of the nation’s economy, contributing significantly to employment and economic output. At the onset of 2025, consumers demonstrate continued caution, against a backdrop of economic instability and the rising cost of living. Retailers face a series of challenges, not limited to changing consumer behaviours, growing cost of sale and the accelerating need for focused improvement and digital transformation.
In 2023, the sector’s economic output was £110.4 billion, accounting for 4.7% of the UK’s total economic output – a 2.2% increase from 2022. Retail sales in Great Britain reached £510 billion in 2023, marking a 3% rise from 2022. Spending distribution per pound was as follows:
- Food shops: 40 pence (9% increase from 2022)
- Clothing shops: 11 pence (7% increase)
- Automotive fuel: 9 pence (12% decrease)
- Household goods shops: 7 pence (1% decrease)
Online retail has grown substantially, with internet sales constituting around 26% of all UK retail sales in November 2024, remaining higher than pre-pandemic levels. Store closures remain an ongoing concern, with reportedly 13,500 stores closing in 2024, however, we’re starting to observe growth in physical store presences for many predominantly e-commerce retailers.
The retail sector faces ongoing challenges, including changing consumer behaviours, economic pressures, and the need for digital transformation. The shift towards online shopping, accelerated by the pandemic, has compelled retailers to adapt their business models to meet evolving consumer demands. Additionally, economic factors such as the cost-of-living crisis and inflation are influencing consumer spending habits, leading to cautious expenditure and impacting retail sales.
Sustainability is becoming increasingly important, with consumers seeking environmentally friendly products and practices. Retailers are responding by adopting more sustainable practices to meet customer expectations and regulatory requirements.
In conclusion, the UK retail sector is navigating a complex landscape marked by economic challenges, shifting consumer preferences, and the imperative for digital and sustainable transformation. Retailers that adapt to these changes are more likely to thrive in the evolving market environment.
SWL’s expert team works with retailers to identify pragmatic solutions to improve sales, service and productivity. We enable retail teams to act on fact, targeting the true issues which impact store performance and present the foundation for continuous improvement.
Contact our team to learn more.
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