UK Retail, Services Sentiment Hit Five-Year, Two-Year Lows

Business confidence in Britain's services and retail sectors hit multi-year lows in May, reflecting deteriorating economic conditions amid rising costs and subdued demand. The Confederation of British Industry (CBI) reported that services sector morale and profitability expectations fell sharply, influenced by increased employer National Insurance contributions and a higher minimum wage, which have raised cost pressures and dampened client demand. Retail sentiment plummeted at the steepest rate in five years, with year-on-year retail sales volumes declining and expected to worsen further in June, although online sales showed some resilience. Retailers plan significant cuts in investment and employment, anticipating continued challenges over the coming quarters, with selling price inflation rising but still below long-term averages. This cautious outlook contrasts with official data showing a retail sales boost in April, highlighting ongoing fragility in consumer demand within parts of the retail sector. Overall, the surveys underscore mounting pressures on UK businesses as inflationary and cost challenges intensify, complicating the economic recovery.