Britain’s high streets are facing one of their toughest festive seasons in years, according to the latest data from the Confederation of British Industry (CBI).Despite retailers banking on the customary Christmas uplift to bolster annual takings, new figures shared with London Business News reveal that sales have fallen short of expectations, with many chains reporting weaker footfall, subdued consumer confidence and growing pressure on margins. Against a backdrop of stubborn inflation, higher borrowing costs and shifting shopping habits, the CBI’s findings paint a stark picture of a holiday trading period that failed to deliver the bounce retailers were hoping for-and raise fresh questions about what lies ahead for the sector in 2025.
Retailers warn of weakest festive sales in years as consumer confidence falters
Retailers across the UK are bracing for a muted December as households rein in spending amid stubbornly high living costs and fragile sentiment. According to the latest CBI snapshot, store owners are reporting a sharp drop in footfall and are scaling back expectations for the crucial trading window, with many flagging discount fatigue and a growing shift toward essential-only purchases. Fashion, homeware and big-ticket items are bearing the brunt, while grocers and value chains are leaning more heavily on promotions to tempt cautious shoppers back into the aisles.
- Rising costs are eroding disposable incomes faster than wages grow.
- Price-sensitive consumers are trading down to budget brands and own-label ranges.
- Online channels are winning last-minute sales from in-store competitors.
- Inventory overhang is forcing earlier and deeper markdowns.
| Sector | Sales Trend | Key Response |
|---|---|---|
| Fashion & Apparel | Down sharply | Heavier discounting |
| Electronics | Flat to weaker | Bundled offers |
| Grocery | Slightly up | Focus on value ranges |
| Luxury | Notably lower | Targeted VIP events |
Business leaders warn that even aggressive promotional strategies may not be enough to offset subdued demand, as shoppers use Black Friday-style deals to stock up early and then close their wallets. Many chains are now prioritising cash preservation over expansion,tightening staffing rotas,reviewing store portfolios and deferring non-essential investment until visibility improves.While retailers hope that a late surge in consumer confidence might still materialise, most are planning for a lean season and a challenging first quarter, with margins under sustained pressure and competition for every pound intensifying both on the high street and online.
Supply chain pressures and rising costs squeeze margins despite holiday discounting
Retailers entered the festive period already on the back foot, as global logistics bottlenecks, higher energy bills and increased labor costs combined to erode profitability. Even as tills rang with aggressive markdowns, many chains reported that the gap between selling prices and the cost of getting goods onto shelves had narrowed to its thinnest in years. Buyers describe a season dominated by renegotiated supplier contracts, emergency freight surcharges and last‑minute changes to product ranges, all aimed at avoiding stockouts while keeping a lid on expenditures.
Behind the scenes, finance directors and merchandisers have been forced into a delicate balancing act: defend volumes with promotions, or protect cashflow by passing on only a fraction of cost increases to shoppers. According to industry analysts, several categories have become particularly exposed to this squeeze:
- Consumer electronics – chip shortages and complex logistics have pushed input prices sharply higher.
- Fashion and footwear – rising fabric, transport and warehousing costs have collided with heavy discounting.
- Grocery and essentials – higher commodity and packaging prices have outpaced modest price rises at the till.
| Segment | Average Cost Increase | Average Selling Price Rise |
|---|---|---|
| Electronics | +14% | +6% |
| Fashion | +11% | +4% |
| Grocery | +9% | +3% |
Sector analysts predict uneven recovery with online outperforming high street stores
Market commentators warn that the rebound in spending will be highly fragmented, with digital platforms set to capture the lion’s share of any upturn. Low footfall, elevated energy bills and persistent rail disruption continue to squeeze bricks-and-mortar outlets, while agile e‑commerce players pivot quickly with flash promotions, frictionless returns and data-driven targeting. Retail strategists suggest that chains most exposed are mid-market fashion and department stores reliant on seasonal footfall, whereas niche online brands and multichannel operators are already edging ahead on margins and market share. Analysts highlight several near-term differentiators shaping performance:
- Logistics resilience – retailers with robust fulfilment networks are better placed to cope with demand spikes and postal delays.
- Omnichannel integration – click-and-collect, ship-from-store and unified stock systems are proving critical to conversion.
- Customer data insight – real-time analytics enable tailored offers, reducing reliance on blanket discounting.
- Cost discipline – leaner digital operations can flex pricing faster than fixed-cost-heavy high street locations.
| Segment | 12‑month Outlook | Key Pressure |
|---|---|---|
| Pure-play online | Positive | Rising delivery costs |
| Omnichannel chains | Mixed | Store rationalisation |
| High street independents | Challenged | Footfall and rents |
City analysts note that investors are already pricing in this divergence, with valuations favouring platforms that can scale online demand at lower incremental cost. While a handful of flagship destinations may benefit from “experience-led” shopping and tourism, secondary locations are expected to lag, potentially accelerating store closures in 2025. For policymakers, the pattern reinforces calls for business rates reform and targeted support for local high streets, as the competitive gap between digital and physical channels continues to widen.
Policy and strategy recommendations to bolster retail resilience and revive UK high streets
Turning around the fortunes of struggling town centres demands a coordinated push from government, councils and the retail industry, not just ad-hoc reliefs and short-term schemes. Targeted business rates reform, including tapered relief for smaller independents and incentives for firms that occupy long-vacant units, would relieve immediate pressure while encouraging new entrants. Local authorities, meanwhile, can use planning flexibility to speed up change of use, allowing redundant retail space to morph into mixed-use hubs with homes, co-working, culture and healthcare. Paired with improved public transport links and safer night-time environments, these measures would support a shift away from transactional high streets towards experience-led destinations that people want to visit and linger in.
- Recalibrate business rates to reward investment and long-term occupancy.
- Streamline planning rules for converting empty shops into mixed-use and community assets.
- Fund “Experience Zones” with events, markets and cultural programming.
- Back digital adoption so bricks-and-mortar retailers can trade seamlessly online and offline.
- Prioritise safety and accessibility to make local centres inclusive for all age groups.
| Action | Lead Stakeholder | Impact on High Street |
|---|---|---|
| Rates relief for independents | HM Treasury | Protects local anchors |
| Pop-up & simultaneously occurring use schemes | Local councils | Reduces vacancy, adds variety |
| Digital skills vouchers | Industry & LEPs | Boosts omni-channel resilience |
| Transport & safety upgrades | Combined authorities | Increases footfall and dwell time |
Final Thoughts
As retailers now pivot from crisis management to planning for the year ahead, the latest CBI data serves as a stark reminder of the pressures facing the high street and online operators alike.With consumer confidence fragile, costs elevated and margins under strain, the sector’s resilience will once again be tested well beyond the festive period.
Policymakers and businesses will be watching closely to see whether this seasonal slump proves a temporary setback or a sign of deeper, structural weakness in household spending. For now, the message from the CBI’s survey is clear: the traditional holiday uplift offered little relief, and the road to a sustained retail recovery in London and across the UK looks longer and more uncertain than many had hoped.
