UK retail sales fell 3.0% year-on-year in April, according to the latest BRC-KPMG Retail Sales Monitor, with food down 2.5% and non-food 3.3% lower as the combined effects of the Iran conflict, weak consumer confidence and an earlier Easter took their toll.
Shore Capital said the decline was expected given a strong 6.1% comparative from April 2025, when sustained warm weather and a later Easter boosted trade, but warned that the outlook for British retailers is being made materially worse by domestic political chaos and the economic fallout from the war in the Middle East.
Consumer confidence has dropped to minus 25 on the GfK index, with higher forecourt fuel prices, rising inflation expectations and the prospect of elevated Bank of England base rates all weighing on discretionary spending.
ShoreCap said the government's performance in office has compounded the problem, noting that the fallout from Labour's drubbing in the May local elections has left a flailing prime minister, a party in disarray and a paralysed civil service, none of which is conducive to any recovery in consumer or business sentiment.
The broker had entered 2026 with more optimistic expectations for the second half of the year, hoping that if the government kept quiet after the November 2025 Budget, confidence might stabilise. The Iran war upended that thesis, and the subsequent leadership crisis has made things worse.
Within non-food, physical stores fell 4.0% while online declined 2.4%, with recent BRC-Sensormatic footfall data showing visits roughly 10% lower year-on-year. Online non-food penetration edged up to 37.9%.
Shoppers pulled back on big-ticket purchases in April, slowing what had been a relatively robust furniture market, though there were early signs of demand for large-screen televisions ahead of the FIFA World Cup.
Health and beauty was the only category sustaining decent growth, while clothing and footwear fared poorly, consistent with recent subdued trading updates from JD Sports and Shoe Zone.
ShoreCap said real living standards are expected to come under further pressure through 2026 as the Iran spillover persists, creating a proper headwind for discretionary consumer spending, though some domestic consumer services could benefit from elevated staycation activity.
The broker said May should yield some evidence of stabilisation against still tough comparatives, while non-discretionary grocers are likely to remain more resilient than discretionary retailers.
The World Cup could yet provide a bright spot for parts of the food, beverage and hospitality sectors, Shore Capital added.