Household finance concerns outweigh summer boost as retail sales fall

Concerns over household finances are weighing on consumer spending across the UK despite a summer boost due to warm weather and England’s World Cup run, according to a Lancashire expert.

The latest Office for National Statistics (ONS) retail sales figures, released today (August 21), show a 0.5 per cent fall in July 2026, following increases of 1.3 per cent and 0.7 per cent in May and June respectively.

The figures measure the monthly and quarterly changes in quantities and values of goods in Great Britain and are an important economic indicator for consumer spending and economic health.

Rajeev Shaunak, head of consumer at MHA, which has offices in Preston and Lancaster, said: “The modest fall in July’s ONS retail sales figures, although expected after a positive May and June, will make uncomfortable reading for the sector, although there will be some comfort in the improved consumer confidence numbers released overnight.”

The UK GfK Consumer Confidence Index is a monthly survey tracking how optimistic or pessimistic households are about their personal finances and the broader economy. It rose to -14 in August 2026 from -17 in the previous month, marking the highest level in two years.

Speaking about the decline in ONS retail sales figures, Rajeev said: “Some of that early summer sunshine and football boost has extended into July, especially for picnics, picky bits, barbecues and summer clothing. But as sales still fell overall, it would suggest households are still cautious.”

Rajeev said that consumers were not necessarily ‘shutting their wallets altogether’ but were becoming more selective about spending.

“They may still spend on low-cost treats, value ranges and essential summer purchases, but bigger-ticket items such as furniture, footwear and technology are likely to remain firmly on hold,” he said. “The hot weather also impacted footfall to many high street retailers as did a natural drop-off from the sales promotions in June.

“The stronger GfK Consumer Confidence reading reinforces that ambiguous picture. There is wider confidence underpinned by warm weather, England’s World Cup run, temporary VAT relief across parts of leisure and hospitality and the early ‘Burnham Bounce’, but there remain deeper concerns about household finances.”

Rajeev added that inflation was a key pressure point.

He said: “With CPI back up to 2.9% and further increases expected, households remain worried about food, energy and everyday bills. Even where grocery inflation has eased, shoppers are still looking for promotions, price cuts and value ranges to make budgets stretch further.

“For retailers, the squeeze is coming from both sides. Demand is fragile, but operating costs continue to rise, from labour and energy to business rates and regulation. Supermarkets and retailers have worked hard to shield shoppers from price rises, but that becomes harder when margins are already under pressure.

“The summer feel-good factor has not been enough to offset cost-of-living concerns. Until real incomes strengthen and inflation eases more convincingly, retail spending is likely to remain cautious, uneven and under pressure.”