UK retailers enjoy 'solid' start to 2025, BRC says

LONDON, Feb 11 (Reuters) - British retailers reported a reasonable start to 2025 after a disappointing 2024 but are concerned about rises in employment costs in April and broader inflation pressures, a trade body said on Tuesday.

The British Retail Consortium said January retail spending was 2.6% higher than a year earlier, well above the average growth of 0.8% over the past 12 months.

Separately, Barclays reported that January consumer spending was up 1.9% on the year - the most since March - despite its gauge of consumer sentiment sinking to its lowest since it started measuring this in April.

"January sales kicked off a solid month for retail," BRC chief executive Helen Dickinson said. "While the bouts of stormy weather put a temporary dampener on demand, sales growth held up well throughout the rest of the month."

However, she said retailers faced 7 billion pounds ($8.7 billion) of extra costs later this year due to increased employer social security contributions, a higher minimum wage and a new packaging levy.

"Many businesses will be left with little choice but to increase prices, and cut investment in jobs and stores," she said.

Most of Britain's major retailers, including Tesco, Next and Marks & Spencer, have flagged a tougher year ahead as employer tax increases, and their potential impact on prices and employment, filter through into the economy.

Official data showed retail spending, excluding automotive fuel, rose by an annual 1.3% in the final quarter of 2024 but that the volume of goods sold dropped by 2.0% after adjusting for inflation.

Sainsbury's, Britain's second largest supermarket chain, has said it plans to reduce its headcount by over 3,000 roles to counter what it called a "particularly challenging cost environment".

Last week the Bank of England forecast consumer price inflation would pick up to around 3.7% by the middle of the year from 2.5% in December and also predicted higher unemployment.

January's BRC figure was partly boosted by a weak reading a year earlier and was also down from a December reading of 3.1% which was artificially boosted by the timing of Black Friday discounts in 2024 compared with 2023. ($1 = 0.8079 pounds)