The UK high street endured a lacklustre festive season as official data published last Friday morning revealed a 0.3% decline in retail sales volumes during December 2024.
While sectors such as clothing and household goods showed resilience, food sales plummeted, contributing to an overall 0.8% fall in retail activity across the final quarter of the year compared with the preceding three months.
This sobering picture of consumer spending has reignited speculation over a potential interest rate cut when the Bank of England’s Monetary Policy Committee (MPC) convenes in February.
Economists and financial experts are sharply divided on whether a cut would be prudent, given the delicate balance between stimulating growth and managing inflation. Newspage and Property Soup spoke to the experts.
EXPERT VIEWS
Anita Wright, Chartered Financial Planner at Bolton James, says: “The MPC is likely to follow its usual pattern—panic at the lack of growth and cut rates prematurely.
“Lowering rates now could stoke inflation, which remains a lurking threat. Historically, the effects of rate cuts take 9–12 months to manifest, risking a scenario where inflation spirals and the MPC is forced to reverse course dramatically.”
David Belle, Founder of Fink Money, says: “This data highlights the damaging effects of the Chancellor’s policies on consumers.
“Retail sales data, paired with November’s downward revision, underscores a lack of consumer confidence.
“With the Bank still pursuing quantitative tightening, the actual impact of rates remains higher than headline figures suggest. The question is whether a cut would suffice in the current economic climate.”
Tony Redondo, Founder of Cosmos Currency Exchange: “The ‘golden quarter’ of retail – October through December – was marred by a 0.3% monthly drop in December, alongside falling inflation to 2.5%.
“Analysts are divided on next steps, but a rate cut of at least 0.25% seems inevitable.
“The broader challenge will be balancing growth stimulation with underlying inflationary risks.”
Rohit Kohli, Director at The Mortgage Stop: “Christmas is make-or-break for retailers, and a 0.3% decline during the busiest season is alarming.
“With consumer confidence shattered, the urgency for a rate cut is clear. Delayed action could lead to deeper economic damage.”
ECONOMIC STRUGGLES
Experts broadly agree that the weak retail data mirrors the broader economic challenges facing the UK.
Rising living costs and stagnant wage growth have squeezed household budgets, leaving little room for discretionary spending. Food sales, in particular, have borne the brunt of this squeeze.
Riz Malik, Director at R3 Wealth: “Retail data is a bellwether for the economy.
“The government’s lack of a credible recovery plan leaves the MPC as the only player capable of averting a deeper crisis. Urgent action is required.”
Michelle Lawson, Director at Lawson Financial, adds “Consumers are out of disposable income, making this data unsurprising but dire.
“A rate cut in February would inject much-needed liquidity into the economy, spurring spending and providing hope for recovery.”
BALANCING RISKS
While some experts champion rate cuts to boost spending power, others warn of inflationary consequences.
The Bank of England’s challenge lies in navigating a path that addresses both sluggish growth and inflationary pressures.
Craig Fish, Director at Lodestone Mortgages & Protection, says: “These figures expose the grim reality of the UK’s finances.
“Without decisive action, the economy risks stagnating further.
“A rate cut, despite potential inflationary risks, could be the reset the country needs.”
And Prem Raja, Head of Trading Floor at Currencies 4 You, adds: “Last week’s data underscores a lack of consumer confidence.
“The MPC has no choice but to cut rates in February.
“The real question is whether a 0.25% cut will suffice or if a more aggressive 0.5% reduction is warranted.”
BLEAK OUTLOOK
With December retail sales data painting a bleak picture, the focus now shifts to the MPC’s next meeting.
Policymakers face a critical choice: take immediate action to bolster spending or risk deeper economic stagnation.
As retailers and consumers alike await clarity, one thing remains clear: the UK economy is at a crossroads.
