Retail sales volumes in the UK experienced a slower rate of decline in the year leading up to July, according to the Confederation of British Industry’s (CBI) latest Distributive Trades Survey. The weighted balance for sales volumes improved significantly, rising to -26% from -54% in June. Despite this improvement, retailers anticipate a similar pace of decline for the year ahead, projecting a -26% balance for August.

The survey, conducted between June 26 and July 14, gathered responses from 191 firms, including 67 retailers, 105 wholesalers, and 19 motor traders. Retailers individually assessed July’s sales performance as poor relative to seasonal expectations, though the severity of this perception lessened compared to June. The balance for this assessment moved to -18% from -40% in the previous month. Looking forward to August, sales are expected to fall further below seasonal norms, with a projected balance of -29%.

Online Retail Sales and Supplier Orders

The downturn was also evident in online retail, where sales volumes fell at a balance of -47% in the year to July, a stark contrast to the zero balance recorded in June. Projections for August suggest a continued decline in internet sales, with an expected balance of -48%.

Meanwhile, the volume of retail orders placed with suppliers contracted at an accelerated pace. The balance for orders fell to -31% in July, down from -26% in June. Retailers foresee this trend continuing, with expectations of a further acceleration in the rate of decline to -36% for the upcoming month.

Inventory Levels and Wholesale Performance

Retail stock volumes, when measured against expected sales, stood at +16%. This figure is slightly down from +19% in June and marginally below the long-run average of +17%. Expectations for August indicate a softening of stock positions, with a projected balance of +12%.

In contrast to the retail sector, wholesale sales volumes showed a significant turnaround. In the year to July, wholesale sales were broadly unchanged, registering a balance of +2%. This marks an end to 25 consecutive months of decline and is a substantial improvement from the -20% balance recorded in June. However, wholesalers anticipate a return to falling sales in August, with a projected balance of -7%.

Motor Trades Rebound and Overall Distribution Sector

The motor trades sector demonstrated a robust recovery. Sales volumes in this segment grew by a substantial +57% in the year to July, representing the fastest growth rate observed since April 2024. This is a dramatic shift from the -30% balance recorded in June. Motor traders are optimistic about the immediate future, expecting continued growth at a +50% balance in August.

Across the entire distribution sector, total sales volumes were broadly flat, achieving a balance of +1% in July. This is a significant uplift from the -33% balance in June and represents the strongest reading since May 2024. Despite this positive overall figure, expectations for August suggest a contraction in sales volumes, with a projected balance of -5%.

Economic Outlook and Policy Considerations

Martin Sartorius, lead economist at the CBI, commented on the survey findings. He noted that while the retail sales downturn lost momentum in July, a full recovery remains distant due to persistent negative sentiment and high cost pressures impacting business activity. Sartorius highlighted that conditions in other distribution sectors were more encouraging, with wholesalers experiencing stable volumes for the first time in over two years and the motor trade sector showing a strong rebound.

Sartorius also pointed to the importance of government support for the high street and the need for broader business rates reform to stimulate investment and growth. He stressed that to achieve inclusive growth across all regions, the government should also address rising labour costs while maintaining labour market flexibility, thereby ensuring the sector can continue to offer valuable career paths, particularly for young people.

Recent government initiatives include a planned 20% cut to business rates for pubs, social clubs, and live music venues in England, set to take effect from April next year. This measure is valued at approximately £100 million annually and is expected to benefit nearly 32,000 premises. The government has indicated a commitment to wider business rates reform, including small business rates relief, to be addressed in a future Budget.

Industry bodies, such as the Federation of Small Businesses, have advocated for an increase in the relief threshold for business rates, proposing a rise from £15,000 to £25,000. This call follows an estimated 104,000 small business premises being brought into the business rates system in April.

Further economic data indicates a rise in employers’ National Insurance contributions, which increased by 24% (£28 billion) in the 12 months leading up to March 31, 2026. This increase in employment costs adds to the financial pressures faced by businesses.

The CBI’s June survey had previously reported that retailers viewed the sales performance for that time of year as the poorest since January 2024. The long-term average for the mean retail sales balance in the survey, dating back to July 1983, stands at +7%.