Going for Growth

UK retail ‘bounding ahead,’ growth seen at 27-yr high

Anmar Frangoul | Special to CNBC.com

Retail sales in the United Kingdom picked up strongly in the year to May, with expectations for next month at their highest in 27 years, according to the latest trade survey from the Confederation of British Industry (CBI).

The survey of 134 firms showed that growth in retail sales and orders for May exceeded expectations, with orders placed with suppliers growing at the fastest pace since December 2010.

"Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead," Rain Newton-Smith, the CBI's Director of Economics, said in a news release.

Oli Scarff, Getty Images

Overall, 60 percent of respondents reported that volumes were higher than last year, with only nine percent reporting a reduction in volumes.

In recent weeks, major U.K. retailers such as discount store Poundland and Marks and Spencer Group (M&S) have reported strong results. Last week M&S said that sales for the year ending March 28 were up 0.4 percent to £10.3 billion ($15.8 billion), while underlying profit before tax had increased by 6.1 percent to £661.2 million.

Newton-Smith said that low inflation would provide household incomes with "a much-needed boost and greater spending power."

CBI forecast U.K. inflation would remain below 1 percent for the rest of the year. The official consumer price index (CPI) fell by 0.1 percent in the year to April 2015—a first for the U.K. since 1960.

Newton-Smith said that overall, the outlook was bright for the U.K. high street, but that "challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector. And investment plans have also taken a hit."

Looking forward, around two-thirds of retailers said that they expected sales volumes to continue growing next month, while one-fifth expected their "overall business situation" to improve over the next three months.