Retail and Leisure Outlook Report 2025

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 5 minute read

Get the insights you need to get ahead.

Learn about:

• The economic landscape and financial pressures on consumer facing businesses

• The drivers of consumer spending going into 2025

• Key challenges and opportunities for retail and leisure brands

• Industry and consumer trends for 2025

• The technology imperative: Digital transformation, AI, cyber security, automation, data-driven decision making

•  Strategies to respond to industry megatrends

 

This year's outlook report for the UK retail, leisure and hospitality industries

This year's outlook report in partnership with NatWest unpacks the shifting dynamics of household spending, evolving consumer expectations, and the major trends that will redefine the industry. Gain valuable insights to help you navigate uncertainty, capitalise on emerging opportunities, and stay ahead in a challenging market.

 

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A new era of consumer decision-making

Households are rethinking how they budget and where they spend. As businesses adapt to post-pandemic realities, those that embrace innovation, foster stronger customer connections, and respond to shifting consumer needs will emerge as leaders.

 

David Scott, head of consumer industries at NatWest, shares his perspective:

"I’m thrilled to share our latest outlook report, which combines exclusive insights from Retail Economics proprietary data with findings from the latest consumer surveys. This comprehensive analysis delves into the key factors shaping the retail, leisure, and hospitality sectors, offering actionable strategies to overcome challenges and seize emerging opportunities.

“As we move further into 2025, it’s clear that the trends highlighted in this report will drive transformative change for years to come. Prioritising partnerships, harnessing technology, staying deeply connected with customers, and fostering staff engagement are critical for sustained success."

 

The road ahead for retail and leisure

On the factors and megatrends shaping consumers and sectors in 2025, Richard Lim shares his insights:

"As we step into 2025, cautious optimism defines the retail landscape. Stabilising inflation and real earnings growth offer respite, yet businesses face a wave of rising operating costs against a backdrop shifting consumer behaviour. 

“Retailers must act now to future-proof their operations — embracing digital technologies to remain relevant, while putting agility and adaptability at the heart of their business. 

“Those who adapt to these trends are more likely to emerge as leaders in a challenging market, fostering loyalty and long-term success.”

 

Macroeconomic trends shaping 2025

After a turbulent 2024, the coming year marks a turning point. While inflationary pressures ease and real incomes rise, businesses must still navigate economic uncertainty, policy changes, and shifting consumer sentiment.

Key economic projections:

• GDP growth: The UK economy is expected to expand by 1–2% in 2025.
• Inflation: Predicted to peak at 2.75% before declining.
• Interest rates: Expected to average 3.7% by Q4 2025, easing borrowing costs.

 

 

Key insights for uk retail and leisure

• Selective spending: Consumers are prioritising experiences and affordable luxuries.
• Value-driven behaviour: Despite improving finances, shoppers remain cost-conscious.
• Financial caution: Households are balancing spending with savings and debt reduction.
• Omnichannel expectations: Seamless integration between online and offline is now essential.
• Automation on the rise: AI, robotics, and machine learning are transforming operations.

 

 

Consumer spending trends to watch

Households are making strategic choices in 2025, with discretionary spending concentrated in key areas:

• Travel & leisure: 33% of consumers plan to prioritise experiences.
• Home furnishings: 28.6% of affluent households are investing in their living spaces.
• Tech & electronics: 25.1% of younger consumers are upgrading devices.
• Automotive: 22.5% of under-45s and affluent consumers are making vehicle-related purchases.
• Luxury goods: 18.4% of younger, high-income consumers are investing in aspirational brands.

 

 

Digital transformation: A retail imperative

Businesses are ramping up investment in AI, automation, and digital strategies to enhance efficiency and customer experience.

"As labour costs rise, automation is moving up the agenda," says David Scott.
"However, businesses must be strategic. Automation for its own sake isn’t enough—success lies in aligning technology with customer needs and employee experience."

Challenges include high implementation costs, skills shortages, and integration complexities, but businesses that get it right will gain a competitive edge.

 

 

Opportunities for growth in 2025

To thrive in the evolving retail landscape, businesses must focus on:

✅ Technology & innovation: Leveraging digital tools to enhance operations and customer engagement.
✅ E-commerce expansion: Online retail is forecast to grow 4.5% to £128.8bn—the fastest pace since 2021.
✅ Personalised experiences: Investing in customer data to enhance digital interactions.
✅ Omnichannel strategies: Integrating online and offline channels for seamless shopping.
✅ Sustainability: Aligning with evolving consumer values to capture market share.

 

 

Key retail challenges in 2025

While opportunities abound, retailers must tackle major hurdles:

🚨 Economic uncertainty: Shifts in fiscal policy and monetary constraints impact growth.
🚨 Supply chain risks: Disruptions continue to affect inventory and pricing strategies.
🚨 Rising costs: Employer NIC and National Living Wage hikes put pressure on margins.
🚨 Consumer confidence: Businesses must align strategies with evolving spending habits.

 

 

Future-proof your business: 10 key strategies

 

• Plan for future talent needs: Build workforce skills for the long term.
• Leverage data: Use consumer insights to refine your strategy.
• Emphasise value: Position your offerings around quality and long-term benefits.
• Strengthen service leadership: Combine human expertise with digital enhancements.
• Commit to sustainability: Meet consumer demand for transparency and responsibility.
• Prioritise experience innovation: Offer customisation and seamless digital interactions.
• Redefine supplier relationships: Foster greater collaboration and transparency.
• Harness regulatory shifts: Use policy changes to drive competitive advantage.
• Develop strategic partnerships: Strengthen ties across the value chain.
• Act now: Staying agile and proactive is the key to success.

 

 

 

Report contents

• Foreword

• Section 1: The macroeconomic landscape

• Section 2: Adapting business investment for today’s consumer demands

• Section 3: Mapping consumer expectations for success

• Section 4: Strategic responses to megatrends

• Conclusion

• About Retail Economics