The red sale signs across UK high streets last month reflected more than seasonal promotions. They signaled a response to weakening consumer demand, with data confirming the trend. Shop price inflation fell to 1% in April, down from 1.2% in March, as retailers intensified price competition to encourage spring spending, according to the British Retail Consortium (BRC). Non-food items entered deflation, becoming 0.1% cheaper year-on-year, while food inflation eased to 3.1% from 3.4% in March.
However, the price reductions may face countervailing pressures. The Middle East conflict has not yet fully influenced consumer prices, but industry analysts warn that its effects could reverse the recent trend. Meanwhile, consumer confidence has declined to its lowest point since October 2023, as households anticipate further cost pressures. Research suggests the average UK household could face additional financial strain this year due to rising energy costs.
The discounting playbook: how retailers are fighting for demand
Retailers are adjusting prices in response to market conditions, where consumer spending has shown signs of slowing. The data underscores the shift. The Confederation of British Industry (CBI) reported that retail sales volumes were below seasonal norms in April, with a net balance of 68% of retailers indicating volumes had fallen in the year to April—the lowest reading since the survey began in 1983. Online sales also declined at the fastest rate since January 2024, while wholesalers reported challenges from high costs and subdued demand.
Helen Dickinson, chief executive of the BRC, stated that weakening consumer confidence had led retailers to compete more aggressively on price to stimulate spending. The approach yielded results, at least temporarily. Discounts on clothing, furniture, and DIY goods contributed to the overall decline in shop price inflation, while Easter promotions on chocolate and other seasonal items helped ease food inflation. However, the situation remains precarious. Dickinson noted that while the full impact of the Middle East conflict on consumer prices has not yet materialized, it would likely become apparent soon.
Mike Watkins, head of retailer and business insight at NIQ, reinforced the warning. Rising fuel prices have already contributed to inflationary pressures, and similar effects are expected in food and non-food supply chains in the coming months. He added that retailers would aim to delay price increases as long as possible, given fragile consumer confidence and the potential for accelerating inflation to further dampen spending.
Retailers face competing pressures: softer demand from consumers and rising costs from suppliers. The question remains how long they can absorb the latter before passing them on to shoppers.
Consumer confidence at rock bottom: why shoppers are pulling back
Consumer confidence in the UK has weakened further, reaching its lowest level since October 2023. GfK’s survey revealed the decline, as households brace for another wave of price increases. Officials have suggested that the UK could face higher food and fuel prices for several months following developments in the Middle East, aligning with estimates of increased financial pressure on households this year.
The CBI’s Martin Sartorius described a challenging retail environment in April, with sales momentum slowing amid fragile consumer confidence. He noted that activity in the wholesale sector remained subdued, with firms reporting headwinds from high costs and muted demand. The data indicates that consumers are exercising caution, and when spending slows, retailers often respond with price adjustments.
Yet there are limits to how much retailers can absorb. Watkins’ remarks on fuel prices serve as a reminder that supply chain costs are rising, and those costs will eventually reach consumers. The timing—and the magnitude—remain uncertain.
The Middle East wildcard: when geopolitics will override retailer discounts
The Middle East conflict presents a significant variable. While its full impact on UK shop prices has not yet materialized, both the BRC and NIQ caution that it is a matter of time. Dickinson’s observation that the effects would become apparent soon reflects an unusual acknowledgment of uncertainty from an industry that typically downplays such risks. The conflict has already driven up fuel prices, and Watkins anticipates a similar impact on food and non-food supply chains in the near future.
Historical patterns show that geopolitical shocks take time to filter through to consumer prices. The 1973 oil crisis, the 2008 financial crash, and the 2020 pandemic all demonstrated that supply chain disruptions can take months to fully manifest. The Iran conflict appears to follow a similar trajectory. The UK’s inflation rate rose to 3.3% in March, up from 3% in February, and economists expect further increases as energy and food costs climb.
For retailers, the challenge lies in balancing two priorities: attracting price-sensitive shoppers and managing rising costs. The discounting observed in April suggests that demand concerns currently outweigh cost pressures. However, as the Middle East conflict’s impact spreads, that balance may shift. Retailers could soon face a difficult choice—raising prices despite the risk of losing customers.
What this means for households: navigating the next eight months
The UK’s retail slowdown reflects a delicate balance. The discounts that reduced shop price inflation in April stem from weak demand rather than economic strength. Behind the numbers lies a clear reality: consumers are spending less, confidence remains low, and the Middle East conflict is expected to push prices higher in the coming months.
For households, the message is straightforward: the relief from lower shop prices is likely temporary. Estimates suggest that rising energy costs could place additional financial strain on the average household this year, with food prices potentially following suit. Officials have indicated that the UK may face higher prices for several months after developments in the Middle East stabilize, suggesting that further challenges lie ahead.
Retailers are navigating a difficult position. They can delay price increases for now, but as Watkins noted, accelerating inflation could further suppress consumer spending. The discounting strategy that proved effective in April may not hold in the months ahead. When the full impact of the Middle East conflict materializes, the current balance could break, and households would feel the consequences.
For now, shoppers may benefit from the discounts. But they should also prepare for potential turbulence. The next eight months will test the resilience of both retailers and consumers, with an uncertain outcome.
