The UK retail sector is entering 2026 under significant strain after a ‘Dismal December’ saw discretionary spending hit its lowest point in over a year. According to the latest BDO High Street Sales Tracker, total like-for-like sales across the ‘Golden Quarter’ failed to recover, with December marking a 1.4 per cent decline in total retail sales - the worst monthly performance since November 2024. Fashion, traditionally a festive driver, bore the brunt of this slowdown, experiencing a 2.3 per cent decline in like-for-like sales. This contraction occurred despite a strong comparative base of 8.8 per cent growth in the previous year, highlighting a sharp erosion in consumer appetite for non-essential apparel.
Strategic stock risks in an inflationary landscape
A primary concern for the industry is the accumulation of unsold seasonal stock. With in-store fashion sales down 0.2 per cent and non-store (online) sales highly volatile - plummeting 9.41 per cent in the second week of December - retailers face a ‘margin trap.’ Sophie Michael, Head of Retail and Wholesale,BDO, warned, retailers who discount too aggressively to clear shelves risk ‘destroying their already squeezed margins,’ especially as operational costs like the national minimum wage are set to rise. Data from the British Retail Consortium (BRC) further validates this pressure, reporting a 2.9 per cent Y-o-Y decline in total UK footfall for December.
Consumer prioritization and the 2026 outlook
The ‘spending squeeze’ is being driven by a fundamental shift in household priorities. Persistent food inflation and high living costs led shoppers to prioritize ‘festive experiences and food’ over clothing and gifts. A recent KPMG study indicates, only 13 per cent of consumers intend to increase discretionary spending in 2026, with most prioritizing travel or home essentials. For fashion brands, Q1, FY26 will be a test of inventory agility and value communication, as ‘selective spending’ replaces the broad festive splurging of previous cycles.
UK retail benchmarking initiative- the BDO High Street Sales Tracker (HSST) is a leading weekly performance index monitoring discretionary spending across fashion, lifestyle, and homeware. It tracks data from retailers nationwide, providing real-time insights into consumer behavior. Amid a ‘K-shaped’ 2026 recovery, BDO assists firms in navigating stock management and margin protection after the worst December sales since 2024.
