This morning has brought us another sign that the UK economy is struggling.
Retail sales volumes are estimated to have fallen by 1.1% in October 2025, following an increase of 0.7% in September 2025 (revised up from a 0.5% rise in our previous publication) and of 0.5% in August 2025 (revised down from a 0.6% rise in our previous publication). This was the first monthly fall since May 2025.
With the UK Budget due in a few days Chancellor Rachel Reeves will have to scratch the claim that Retail Sales are booming from her list, which may well be getting rather thin. She could pivot to the ersatz quarterly figure which gives a better impression.
The quantity of goods bought (volume) in retail sales is estimated to have risen by 1.1% in the three months to October 2025 compared with the three months to July 2025
But those in the know will respond with the annual figures which show very little growth.
Compared with the three months to October 2024, sales volumes were up by 0.4%.
Frankly they are within the margin of error. This is even more true of the annual comparison for October on a stand-alone basis.
but rose by 0.2% compared with October 2024.
There is another unfortunate reminder of economic issues via a comparison with pre Covid times which has widened again.
Volumes were down by 3.3% compared with their pre-coronavirus (COVID-19) pandemic level in February 2020.
What happened in October?
We get less detail these days than we used to but there may well be a trend building here.
Supermarket sales volumes fell for the second month in a row.
There was also this.
Clothing store sales volumes also fell following a recent peak in September 2025, with retailers reporting that consumers held back in preparation for Black Friday discounts.
They have missed something that I pointed out on Wednesday.
Sadly our official statisticians overlooked this area but it rose by 1% on the month so I looked further.
This was however partially offset by an upward contribution coming from women’s casual outer jackets…..Prices overall rose this year but were little changed a year ago, with the main contributions coming from lady’s scarves.
So there may well have been price resistance. In case you are wondering how the Office for National Statistics missed this they now concentrate on three-monthly changes and thus miss monthly ones.
The clothing issue affected the online world too.
Mail order (online) retailers within non-store retailing also dipped on the month, in part because of online clothing retailers. Some online retailers also mentioned delayed spending in the lead up to Black Friday.
As you can see they are keen to emphasise the Black Friday issue which may or may not be true. As I have been pointing out for a couple of years now there is an issue with the seasonal adjustment process. But that can ( and has ) swing/swung wither way.
Purchasing Managers or PMI
This also brought little cheer for a Chancellor desperate for good news.
“November’s flash PMI surveys brought disappointing news on the UK economy. Economic growth has stalled, job losses have accelerated, and business confidence has deteriorated. “The PMI is broadly consistent with no change in GDP in November and a meagre 0.1% quarterly pace of growth so far in the fourth quarter.”
That first sentence is rather damning and agrees with the recent string of official data. Returning to the issue of seasonal adjustment I have been pointing out for a while that the official series for UK GDP has a bias towards the first half of the year and in particular the first quarter for a while now and it looks like it is happening again.
The particular driver is below.
UK private sector businesses experienced a softer expansion in activity during November, primarily due to a loss of momentum in the service sector, which reported a decline in new work for the first time since July.
So the relief at manufacturing improving a bit got rather swamped.
On a positive note, manufacturers registered their first increase in total new orders in over a year, supporting a sustained (albeit slower) uplift in goods production.
There was some better potential news on the inflation front which would be very welcome if it came to fruition.
“Concerns over the inflation outlook will meanwhile be further assuaged by a marked drop in selling price inflation to the lowest for nearly five years. Faced by weak demand and intensifying competition, firms are cutting prices to win sales. Prices charged for goods fell at the sharpest rate since 2016, and service providers are likewise reporting much-reduced pricing power. “
The report even came with a hint for the Bank of England.
The PMI data therefore suggest the policy debate will shift further away from inflation worries toward the need to support the struggling economy, hence adding to the chances of interest rates being cut in December.
UK Public Finances
Here the news was bad although in relative terms there was an improvement.
Borrowing – the difference between total public sector spending and income – was £17.4 billion in October 2025; this was £1.8 billion (or 9.6%) less than October 2024 but the third-highest October borrowing (not adjusted for inflation) since monthly records began in 1993, after those of 2024 and 2020.
Debt Interest
Let me explain one of the issues and it links to hopes for lower inflation as expressed by the PMI report above. You see the recent inflationary burst in the UK has added to the cost of living crisis and been very expensive.
The £8.4 billion interest payable on central government debt in October 2025 includes £2.6 billion of capital uplift. This largely reflects the 0.4% increase in the RPI between July and August 2025.
Capital uplift is accrued throughout the life of each index-linked gilt but is paid to gilt holders as interest at redemption.
On a monthly basis this cost of inflation varies as I recall it being much higher last time around and lower this time, but the overall trend has sung along with Yazz.
The only way is upBabyFor you and me nowThe only way is upBabyFor you and me now.
So a reduction in inflation would help here.
Also whilst looking at debt interest I note that conventional payments are higher another point I have been making for several years. To make it clearer I have looked at September and October together and we paid £11.1 billion in 2024 and £12.6 billion this year. It is always a slow burner but it keeps creeping higher.
Tax Receipts
Another signal of how the economy is doing via tax receipts which at first look good.
Central government’s current receipts were £86.4 billion in October 2025, £5.8 billion (or 7.3%) more than in October 2024.
But taxes were raised.
compulsory social contributions increased by £2.8 billion to £16.9 billion; on 6 April 2025, as changes to the rate of National Insurance contributions paid by employers came into effect.
Leaving us with this.
central government tax receipts increased by £3.0 billion to £63.6 billion; this included increases of £1.2 billion in Income Tax, £0.9 billion in Value Added Tax (VAT) and £0.6 billion in Corporation Tax receipts.
These rose by around 5% and by the time one allows for stealth taxes such as no inflation indexation for Income Tax thresholds we are falling back to the inflation rate.
Bank of England
Move along now nothing to see here.
In October 2025, central government made a £6.7 billion quarterly payment to the Bank of England (BoE) Asset Purchase Facility (APF) Fund. This recent payment was £0.5 billion smaller than the equivalent payment in October 2024. These payments are recorded as both central government net investment expenditure and BoE receipts, so have no impact on overall public sector borrowing (PSNB ex).
Comment
As you can see this is not a particularly good day for the UK economy with both the PMI survey and Retail Sales heading lower. Whilst the monthly public finances figures are not as relatively bad as they have often been the overall picture is below.
In October 2025, central government made a £6.7 billion quarterly payment to the Bank of England (BoE) Asset Purchase Facility (APF) Fund. This recent payment was £0.5 billion smaller than the equivalent payment in October 2024. These payments are recorded as both central government net investment expenditure and BoE receipts, so have no impact on overall public sector borrowing (PSNB ex)……..Borrowing in the FY to October 2025 was £9.0 billion (or 8.4%) more than in the FY to October 2024.
It was a political choice in last year’s Budget and it is one area where Chancellor Rachel Reeves can say she has succeeded.
This is the second-highest FY to October borrowing since monthly records began in 1993, after that of April to October 2020, during the coronavirus (COVID-19) pandemic period.
The OBR
The first rule of OBR Club is that the OBR is always wrong. Please rememner that next week when the Chancellor and our political and media classes claim the opposite.
This was £1.8 billion (or 9.6%) less than in October 2024 but £3.0 billion (or 21.4%) more than the £14.4 billion forecast in March 2025 by the Office for Budget Responsibility.
Plus this.
it borrowed £116.8 billion over the seven-month period, £9.9 billion (or 9.2%) more than the £106.9 billion forecast by the Office for Budget Responsibility in March 2025.
The Ashes
On a happier note this has opened in exciting fashion.
