Reading time: 4 min
January volumes jumped 1.8% against a 0.2% consensus, the strongest monthly rise since May 2024. Strip away record-price gold jewellery and post-Christmas bargain hunting, and the picture looks far less comfortable: consumer confidence is at a two-year low and high-street administrations jumped 41% in a single month.
The Headline and What’s Behind It
British retail sales volumes rose 1.8% month-on-month in January, the Office for National Statistics reported on Friday, smashing the Reuters consensus forecast of 0.2% and marking the first back-to-back monthly increase in six months. On an annual basis the jump was even more dramatic: volumes climbed 4.5% year-on-year, the fastest pace since February 2022. Core retail sales, excluding automotive fuel, were stronger still at 2.0% on the month and 5.5% annually.
But what actually drove the number? The ONS attributed much of the gain to categories that have little to do with everyday consumer spending. Online jewellers reported demand that, in the ONS’s own words, hit “unprecedented levels” — a surge fuelled not by consumer exuberance but by gold prices smashing through $5,000 per ounce (roughly £3,718) for the first time, as investors piled into safe-haven assets amid geopolitical uncertainty. Commercial art galleries and antique auction houses also had an exceptional month, pointing to a similar flight to tangible assets. Sports supplements retailers rode a seasonal wave of New Year resolutions, while tech retailers continued a strong run dating back to September 2025.
The Confidence Contradiction
The January data sits awkwardly alongside virtually every other measure of consumer sentiment. The GfK Consumer Confidence Index edged up to -16 in January — its tenth consecutive year in negative territory. S&P Global’s UK Consumer Sentiment Index posted 44.8 in February, among the weakest readings in two years, with debt levels rising across most age groups and savings falling sharply. A KPMG survey from December found 58% of consumers believed the economy was worsening, with 42% planning no big-ticket purchases in the first quarter.
Cande Cooper, retail partner at Deloitte, offered a more nuanced reading: consumers were prioritising finding the best deals rather than spending freely. Heavy January discounting drew shoppers to higher-value items at reduced prices, creating what she called a “generous uplift” driven by bargain-hunting, not loosened purse strings. Wet and stormy weather further concentrated purchases online, with internet sales jumping 19.6% year-on-year — the largest annual rise since April 2021 — while in-store footfall fell.
A High Street in Crisis
The headline lands in the middle of what has been the most brutal January for the British high street in years. Insolvency Service figures show company administrations surged 41% between December and January to 151. Claire’s Accessories, The Original Factory Shop, Quiz, Russell & Bromley, Revolution Bars and TGI Fridays have all entered administration since the start of 2026, with Game Retail announcing its intention to follow. Russell & Bromley, a 150-year-old footwear brand, was broken up in a pre-pack deal with Next acquiring just three of its 41 stores. Retailers face fresh pressure from April when a Covid-era 40% business-rates discount expires.
The disconnect is not as contradictory as it appears. Consumers are spending selectively — hunting discounts, buying gold as an inflation hedge, shifting online — a pattern that rewards large, well-capitalised platforms while starving mid-market chains of margins. The Bank of England held its base rate at 3.75% on February 4 by a narrow 5-4 vote, with CPI inflation still at 3.4%. Markets expect the first cut of 2026 in March or April, with rates settling around 3.25-3.5% by year-end. Thomas Pugh, chief economist at RSM UK, said retail sales should benefit as interest rates fall and housing activity picks up, but warned that a disruptive government leadership contest could dampen confidence again.
The January number tells a story of adaptation rather than optimism. British consumers are buying gold because they feel uncertain, hunting bargains because they feel stretched, and shopping online because the weather was miserable. The Bank of England projects underlying growth of just 0.2% in the first quarter, and retail volumes remain exactly where they were before the pandemic struck in February 2020. Five years of zero progress is a sobering baseline for any recovery narrative.
