UK retail sales recorded their sharpest decline in nearly a year, as consumers cut back on spending and reduced car journeys in response to the global energy shock stemming from the Iran conflict. Data from the Office for National Statistics (ONS) showed a 1.3% month-on-month drop in the volume of goods sold both online and in stores. This followed a revised 0.6% increase the previous month, which was driven by household fuel stockpiling. The April figure represents the largest decline since May 2025 and was worse than the 0.6% drop economists had anticipated.

Grant Fitzner, Chief Economist at the ONS, stated, "After strong growth last month, automotive fuel sales fell in April, with evidence suggesting drivers are conserving usage after stockpiling fuel in March. These weak fuel purchases contributed significantly to the large monthly fall in overall retail sales in April." Sales of automotive fuel plummeted by 10%, the most significant monthly drop since November 2020 during the COVID-19 pandemic. This indicates drivers are making fewer trips after filling their tanks, which in turn likely reduced spending in shops.

Excluding automotive fuel, retail sales still fell by 0.4% compared to March. Sales declined across all categories except food. Clothing stores reported their worst performance since June of last year, with retailers attributing it to weak consumer sentiment and unsettled weather.

With consumers accounting for approximately 60% of UK economic activity, the Labour government is under pressure to implement policies that ease cost-of-living pressures and stimulate spending. On Thursday, Chancellor of the Exchequer Rachel Reeves announced a support package, including a reduction in Value Added Tax (VAT) for UK summer tourist attractions, aimed at boosting a summer tourism market that may be dampened by global instability.

The report adds to evidence that the war in Iran is adversely affecting the UK's growth prospects. Even before the conflict, consumers were reluctant to spend their recent wage increases. Now, the prospect of accelerating inflation and a weakening labor market could further heighten household caution. An earlier-released GfK consumer confidence report on Friday showed the sharpest decline in savings intentions since 2024, suggesting households are dipping into savings and avoiding big-ticket purchases to cover essential costs.

For now, however, the impact of the Middle East conflict on UK households remains largely confined to higher prices at petrol stations. Inflation in April came in lower than expected, aided by more favorable annual base effects and government bill subsidies. Nevertheless, the war's effects may become more pronounced in the coming weeks. The UK's cap on household energy bills is set to jump by 13% this summer, reflecting higher wholesale gas and electricity costs.

The retail sales data concludes a week of releases that bolster the case for the Bank of England to hold interest rates steady in June. Policymakers must balance the gloomier growth outlook caused by the Middle East conflict against the risk of a renewed cost-of-living crisis. S&P's business surveys indicated the first contraction in the private sector in over a year. ONS data also showed a decrease in job vacancies, a slowdown in wage growth, and inflation cooling more than anticipated.

Independent data from the British Retail Consortium (BRC) also indicated retail sales took a hit in April. The BRC attributed this to low consumer confidence and uncertainty around summer holiday plans due to expectations that the Iran war would disrupt international travel.