INSIGHT Lower inflation should, in theory, improve


consumers’ purchasing power after several years of high living costs. However, the recovery in real household income is likely to be gradual. Many consumers remain financially stretched after prolonged periods of elevated food, energy and housing costs, meaning spending habits may remain conservative. Add to this higher unemployment, which


typically dampens consumer confidence, and again could disproportionately affect sectors such as fashion, furniture and consumer electronics, where spending is more discretionary.


WHAT THE SPRING ECONOMIC FORECAST MEANS FOR THE RETAIL SECTOR F


The UK government’s latest Spring Economic Forecast, delivered by Chancellor Rachel Reeves alongside updated projections from the Office for Budget Responsibility (OBR), paints a mixed picture for the British economy. While inflation is expected to continue easing and public finances appear broadly stable, downgraded growth projections and rising unemployment suggest the retail sector could face another challenging year.


48 • FOOTWEAR & FASHION TODAY • APRIL 2026


or retailers already navigating cautious consumers and persistent cost pressures, the forecast indicates that a


full recovery in consumer spending may still be some way off. A key headline from the Spring Forecast was the OBR’s downgrade to UK economic growth expectations. The watchdog now expects the economy to grow by around 1.1 per cent in 2026, lower than earlier projections. Growth is forecast to improve gradually in the following years, reaching roughly 1.6 per cent by 2027-2028. As consumer spending is closely tied to overall


economic performance, slower growth generally translates into more cautious household spending, particularly on discretionary items such as clothing, electronics and home goods. As a result, many retailers may find it difficult to drive sales through volume alone, increasing reliance on promotions and price competition.


Inflation easing but only gradually There is some positive news in the outlook. The OBR expects consumer price inflation to fall from roughly 3.4 per cent in 2025 to around 2.3 per cent in 2026, before reaching the two per cent target set by the Bank of England in 2027.


Persistent cost challenges Even as inflation slows, many of the structural cost pressures affecting retailers remain. Energy prices, supply chain volatility and logistics costs continue to weigh on margins. Retailers are also managing higher operating expenses linked to wages, property costs and inventory management. These pressures mean businesses may struggle to balance margin protection with competitive pricing, particularly in a market where consumers are increasingly focused on value. Helen Dickinson, Chief Executive of the British


Retail Consortium, said the Spring Forecast underlines the scale of the economic challenge for UK businesses… “At a time when job vacancies are falling


and confidence is weak, the priority should be protecting employment and strengthening living standards,” she said. “Instead, retailers face a cost of doing business crisis. Employment costs rose by more than £5bn last year, and poorly implemented reforms in the Employment Rights Act risk adding further cost and complexity at the worst possible moment.”


A broken business rates system Referring to the Chancellor’s delivery of her Spring Forecast, where she spoke about boosting investment in communities, Ms Dickinson said the UK’s high streets are the backbone of local economies, yet business rates continue to undermine their viability. “While Government has taken some steps to fix the current system, it is broken and must be overhauled entirely to reduce the burden on the high street once and for all.” She continued: “Retail has unparalleled reach


across the country, and stands ready to work with the Government to ‘spread’ and ‘unlock’ opportunity in every part of Britain. But to do so, Ministers must get a grip on the cost of doing business so retailers can invest confidently in people, places and prices.” So it seems that retailers that focus on value,


efficiency and adaptability are likely to be best positioned to weather this storm; investment in cost control, flexible supply chains and targeted promotions may prove essential as the sector continues to navigate a slow and uneven economic recovery.


What do you think? You can email the Editor any time at jcheeseman@datateam.co.uk.


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