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Primark saw sales drop in the UK as people spent less at the budget retailer, its owner Associated British Foods (ABF) said.

In the year to September it saw a 3.1% fall in like-for-like sales compared with the year prior, which it said reflected weak consumer confidence that meant shoppers were spending less in stores.

The company said it expected the “subdued” retail market to impact Primark sales into 2026.

Across the entire business, which alongside Primark also owns food brands Twinings, Ovaltine and Ryvita, profits fell 13% to £1.4bn for the year and ABF said it was exploring splitting off the fast-fashion retailer and its foods brands into two separate businesses.

Chief executive George Weston said though he was “confident” for 2026, it depended on the “consumer environment” which was was “particularly unpredictable at the moment”.

Shoppers have been tightening their belts amidst cost increases from rising inflation, leading them to spend less on things like fashion and turning to even cheaper competitors such as Shein and Temu.

Inflation, the rate at which prices rise, has held stubbornly at 3.8% for the year to September. Although inflation is down from highs seen in 2022-2023, it remains above the Bank of England’s target of 2%.

Randeep Somel, fund manager at M&G Investments told the Today programme the decline of Primark sales showed “the consumer is staying at home and seeing how the Budget goes at the end of this month”.

The Associated British Foods boss said in a call after the financial results that there was a “working assumption” in ABF that a separation of Primark “is where we would like to get to”, although no decision had been made.

The news comes as a series of casualties on the UK high street continue as the costs of maintaining bricks-and-mortar stores becomes too high amidst rising online competition and pressure on consumer spending.

Recent retail names that have had to close stores or enter administration include Bodycare, Claire’s, and Pizza Hut which said it will be slashing the number of restaurants it operates.