PAC Pacific Current Group Ltd

LONDON—U.K. retail sales fell in March, while Treasury chief George Osborne missed a key borrowing goal, adding to signs the economy slowed in the first quarter of 2016.

The data may intensify concerns that growth in the British economy is easing off ahead of a referendum on membership of the European Union scheduled for June.

The Office for National Statistics said Thursday that British retail sales fell 1.3% in March compared with February, a much larger fall than expected. Analysts polled by The Wall Street Journal were expecting sales to be flat on the month.

The decline was felt across the sector, with sales falling at clothing stores, food stores, department stores as well as through mail-order and online outlets, the ONS said.

The figures are the latest in a series of disappointing data in the U.K., coming after weak industrial production numbers and the first rise in unemployment in almost a year. Thursday's retail sales figures suggest that consumer spending, the engine of recent economic growth, weakened in March amid subdued pay growth and a gloomier economic outlook.

Among the clouds darkening the horizon: Uncertainty over the outcome of a referendum on the U.K.'s EU membership scheduled for June 23, which Bank of England officials say risks slowing the economy by prompting consumers and businesses to delay spending.

Proponents of exiting the bloc say that leaving the EU would boost the economy by freeing businesses of burdensome regulation and allowing the U.K. to focus trade on faster-growing parts of the world.

Also Thursday, the ONS confirmed that George Osborne has missed his borrowing goal for the 12 months through March, an early setback in his latest five-year push to close the U.K.'s budget deficit.

Data showed the government borrowed £ 74 billion ($106 billion) over the fiscal year, £ 1.8 billion more than Britain's Office for Budget Responsibility, the nation's fiscal watchdog, predicted. Recent monthly borrowing figures had suggested the target was likely to be missed.

The overshoot means Mr. Osborne will have to find fresh savings in government spending, raise taxes or hope for faster growth in the economy to meet his goal of balancing the government books by 2020.

Write to Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

April 21, 2016 05:25 ET (09:25 GMT)

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