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Retail sales fall as consumer confidence slumps Ahead of budget, global markets Wobble

September figures show 0.4% drop as warm weather and cost of living pressures weigh on shoppers, while AI and oil fears trigger steep sell-off

By LineZotpaper

Published23 October 2026

Updated23 October 2026

Read Time3 min

Sources3 outlets

British retail sales fell 0.4 per cent in September, far exceeding the 0.1 per cent decline forecast by economists, official data showed on Friday, as unseasonably warm weather dampened demand for autumn clothing and cost of living pressures began to bite. The figures come alongside a sharp drop in UK consumer confidence, the fastest since the Covid pandemic, and global market turmoil driven by growing fears over AI stocks and rising oil prices, clouding the outlook for Chancellor John Healey's budget next week.

What we know so far

Retail sales in Great Britain fell 0.4% month on month in September, steeper than the 0.1% fall economists had expected, according to the Office for National Statistics.
The volume of fuel sold in Great Britain soared 2.2% month on month in September despite record prices, returning to levels last seen before the Middle East conflict, driven by a 6.1% increase in value.
UK consumer confidence fell at the fastest rate since the Covid pandemic, according to The Guardian.
Brent crude oil hit $114 a barrel, a five-month high, amid growing AI fears and global stock wobbles.

How it unfolded

1 SeptUK motor fuel sales value rose 10.9% month on month in March 2026, immediately after the start of the US-Iran conflict, the biggest monthly increase before September. (Business | The Guardian)
30 SeptRetail sales volume in Great Britain fell 0.4% month on month in September, according to the Office for National Statistics. (Business | The Guardian)
23 OctBrent crude hit $114 a barrel, a five-month high. (Business | The Guardian)
23 OctThe UK government said it would 'slash red tape' to save businesses £800m. (Business | The Guardian)

The Office for National Statistics (ONS) reported that the volume of goods sold fell 0.4 per cent month on month in September, a steeper drop than the 0.1 per cent expected by economists. Stripping out a 2.2 per cent rise in motor fuel sales, retail volumes slumped 0.7 per cent, far worse than the 0.1 per cent fall forecast by the City.

The drop was broad-based, with non-store retailing, predominantly online sales, falling 2.2 per cent month on month, the biggest percentage fall across the sector. Textile, clothing and footwear stores recorded a 0.9 per cent decline, while household goods retailers fell 0.5 per cent and supermarkets dipped 0.4 per cent, partly because of poor sales of clothing ranges due to the unseasonably warm autumn weather.

Only department stores bucked the trend, with a 0.2 per cent increase in sales volumes. The strong performance of motor fuel sales, which rose 6.1 per cent in value terms, the biggest month-on-month increase since March, returned volumes to levels last seen before the start of the conflict in the Middle East.

“The drop in retail sales in September and the sharp fall in consumer confidence in October raises the risk that the economy’s recent run of resilience might be coming to an end,” said Thomas Pugh, chief economist at RSM UK. “At least part of the drop in retail sales in September can be attributed to warm weather dampening demand for winter clothing, which might reverse in October. But retailers also reported lower footfall and customers cutting back, suggesting cost of living pressures might be starting to bite.”

The data comes as global stock markets experienced a fresh wave of selling, with the tech-heavy Nasdaq falling 2.6 per cent and the Philadelphia semiconductor index dropping 6.7 per cent, its worst day since June. Brent crude oil hit a five-month high of $114 a barrel, driven by geopolitical tensions, adding to the pressure on households and businesses.

The UK government has promised to “slash red tape” for businesses in reforms it claims will save firms across the country £800 million a year in administrative and tariff costs. The government has set itself a target of reducing the administrative burden of regulation by 25 per cent by the end of the current parliament.

The ONS revised August's retail sales figures up from a 0.5 per cent monthly rise to 0.7 per cent, helping the third quarter record 0.7 per cent growth year on year. Hannah Finselbach, a senior statistician at the ONS, said that food and drink sales contributed to quarterly growth, partly helped by warm weather and the World Cup, although they fell back in September.

Analysis

Why This Matters

The fall in retail sales and consumer confidence adds pressure on Chancellor John Healey ahead of next week's budget, with businesses already urging cuts to employer national insurance contributions.
The combination of a weak domestic economy and global financial turmoil, driven by AI stock fears and rising oil prices, raises the spectre of a more severe economic slowdown.
The retail drop suggests that households are cutting back just as the crucial Christmas quarter begins, potentially dampening the festive retail season.

Background

The UK economy has shown resilience through the early part of the year, but recent indicators point to cooling. Consumer confidence fell in October at its fastest rate since the pandemic, while inflation and borrowing costs remain high. The government faces competing pressures: to support businesses and households while also addressing fiscal challenges. Global markets are also unsettled by a sell-off in AI stocks and geopolitical tensions driving oil prices to five-month highs.

Key Perspectives

Chancellor John Healey and the Government: The government is trying to balance its budget with the need to support growth. It has promised to cut red tape and is considering business requests to reduce employer national insurance costs. Economists: Many analysts see the retail sales and confidence data as warning signs. Paul Dales of Capital Economics said the figures suggest real consumer spending and GDP could grind to a halt in the fourth quarter and first quarter of next year. Retailers: Major retailers including Tesco, Costa Coffee, and the Co-op have urged the chancellor to cut the cost of employing young people, arguing that previous changes to national insurance thresholds have hurt high street jobs and increased youth unemployment.

What to Watch

The budget on 30 October, where the chancellor is expected to set out tax and spending measures.
Next week's corporate earnings reports from Microsoft, Google, Amazon, and Sandisk for further signs of AI sector health.
Whether Brent crude oil prices continue to rise and how long the sell-off in global AI stocks persists.

Sources

UK retail sales drop after warm weather hits winter clothing demand · The Irish News
Oil hits five-month high as global stocks wobble on AI fears; retail sales in Great Britain fall as shoppers cut back - business live · Business | The Guardian
Retail sales in Great Britain fall as struggling households cut back · Business | The Guardian

Checked

11 claims in this story checked against 1 source: 8 supported.

Show each claim

SupportedBritish retail sales fell 0.4% in September, versus a 0.1% decline forecast by economists.Business | The Guardian: “The Office for National Statistics (ONS) said the volume of goods sold fell 0.4% month on month in September, much steeper than economists’ consensus expectations of a 0.1% fall.”
SupportedUnseasonably warm weather dampened demand for autumn and winter clothing.Business | The Guardian: “The drop in sales, fuelled in part by poor online sales of autumn and winter wear because of unseasonably warm weather last month”
Partly supportedCost-of-living pressures had begun to bite shoppers.Business | The Guardian: “But retailers also reported lower footfall and customers cutting back, suggesting cost of living pressures might be starting to bite.”
SupportedUK consumer confidence fell at the fastest rate since the Covid pandemic.Business | The Guardian: “figures show that consumer confidence in the UK has fallen at the fastest rate since the Covid pandemic.”
SupportedAI and oil fears drove a steep sell-off in global markets.Business | The Guardian: “So collectively, those concerns drove a huge risk-off move”
Partly supportedThomas Pugh said the drop in retail sales and fall in consumer confidence raised the risk that the economy’s resilience might be ending.Business | The Guardian: “The drop in retail sales in September and sharp fall in consumer confidence in October raises the risk that the economy’s recent run of resilience might be coming to an end.”
SupportedSales excluding motor fuel fell 0.7%, worse than the City’s 0.1% forecast decline.Business | The Guardian: “Stripping out the boost from fuel, retail sales slumped 0.7% month on month in September, much worse than the 0.1% fall forecast by the City.”
SupportedMotor fuel sales rose 6.1% in value terms, the biggest month-on-month increase since March.Business | The Guardian: “In value terms the 6.1% increase in fuel sales is the biggest month-on-month increase since 10.9% was recorded in March”
Partly supportedDepartment stores were the only retail category to buck the sales decline.Business | The Guardian: “The only sector to record an increase in sales last month – apart from automotive fuel – was department stores”
SupportedThe government says its red-tape reforms will save businesses £800 million a year in administrative and tariff costs.Business | The Guardian: “reforms it claims will save firms across the country £800m in administrative and tariff costs per year.”
SupportedThe ONS revised August retail sales growth from 0.5% to 0.7%, helping quarterly sales growth reach 0.7% year on year.Business | The Guardian: “The fall in monthly sales follows a bumper August, with the ONS revising figures up from a 0.5% monthly rise to 0.7%, helping quarterly sales increase to 0.7% year on year.”