UK retail sales remained subdued in December despite surge in online sales

British shoppers splashed out on online shopping in December, but sales of non-food items grew at their slowest pace since January 2013, an industry survey showed.

According to figures released by the British Retail Consortium (BRC) and KMPG, UK retail sales rose by 0.1% on a like-for-like basis from December 2014, when they had posted a 0.4% decline from the corresponding period 12 months prior.

The standout winner of the period was the online sector, which saw sales of non-food items surge 15.1% year-on-year in December. However, despite the sharp increase and a favourable economic environment, analysts said the Christmas period was not one to remember for Britain-based retailers.

"With price deflation and offers aplenty, the current retail climate is great news for consumers, however retailers are not benefiting from the improved economic climate in the same way that other sectors have done," said BRC's chief executive Helen Dickinson.

"This is in part due to changing consumer shopping habits and the rising cost of doing business for retailers such as business rates and the national living wage due to be introduced in April."

On a total basis, sales rose 1% year-on-year in December, matching the rate of growth registered in the previous year. Total growth was above the three-month average of 0.9% but below the year-long average of 1.7%, while, adjusted for the BRC-Nielsen shop price index deflation, total growth stood at 3.0%.

"Despite a number of positive economic indicators, retail sales over Christmas were relatively flat with more products on discount and the depth of discounting also deeper," said David McCorquodale, head of retail at KPMG.

"Although retailers tried to tame Black Friday 2015, it still had a significant impact on the shape of sales over the festive season, spreading spend over six weeks rather than two."

In the final quarter of 2015, overall sales declined 0.1% year-on-year on a like-for-like basis, dragged lower by a 1.1% drop in food items. On a total basis sales across all the categories considered in the survey rose 0.9% compared with the corresponding period in 2014, as food sales grew 0.2%.

Analysts attributed the figures to shopper's new-found knack of doing more research to ensure they can get the best value for their money.

"People have become experts at hunting down value, benefiting from more ways to shop in-store and online, but will treat themselves when offered the right combination of convenience, price and quality," said Joanne Denney-Finch, chief executive at retail analyst group IGD.

Among individual sectors, retailers of home accessories were the star performers in December, while toys producers also enjoyed a strong finish to 2015. Fashion retailers, however, bore the brunt of unusually warm weather in the lead up to the festive seasons, with Marks & Spencer, Next and Sports Direct all posting disappointing figures in the first days of 2016.

On 7 January, the former said sales in its fashion division during the Christmas quarter fell 5.7% year-on-year, while the following day Sports Direct issued a profit warning, indicating it was unlikely to meet its target of earning £420m (€564m, $614m) before tax and other costs in the 12 months to the end of April.