As shoppers continue to return to highstreets, the surviving retailers of the pandemic are yet to fully understand the lasting effects on consumer behavior.
UK retail sales rise above pre-lockdown levels
Total retail sales grew for the second consecutive month in July, reporting annual value and volume growth of 3.7% and 3.1% respectively.
Whilst top-line figures are encouraging, subsectors are experiencing the impact of easing restrictions differently. Growth in the food sector has slowed significantly, with panic-buying habits seen in April and May continuing to ease and the number of trips potentially falling since the introduction of compulsory face coverings at the end of July. Food, however, has still enjoyed the largest increase in retail sales during lockdown. Sales in Fashion and Department Stores continue to face challenges despite some stores re-opening and consumers may still be restricting their spending as the country enters an official recession.
A month and a half since most retail stores in the UK were able to re-open, year-on-year growth in internet sales has slowed only slightly this month to 52.9%. With continued growth across the board in every sub-sector, this is a sure sign that consumers continue to favor online shopping over braving the highstreets.
This is further demonstrated by the continued decline in footfall, which was 49.3% lower than last year for July. Whilst this is a significant year-on-year decline, it marks an improvement on the 71.2% decline recorded last month. It will be interesting to see the impact of the Government’s “Eat Out to Help Out” scheme, which is driving consumers to restaurants in August, and whether the increased footfall has had a knock-on impact on high street retail.
Debenhams owner Celine is the latest to appoint administrators, and the survival of many other retailers still hangs in the balance as job cuts continue and both stores and consumers adjust to new government guidelines. Landlord renegotiations are becoming increasingly common, but with the COVID-19 moratorium on winding up petitions expiring on September 30, we may see more pressure over the coming months.
UK enters first official recession since 2009
The UK economy contracted by a fifth in the three months to June, suffering its biggest slump on record and pushing the UK into its first official recession since 2009.
Dual threats of a second wave, and slow progress over Brexit negotiations hang over current signs of recovery. The Bank of England does not expect the UK economy to return to its pre-pandemic size until the end of next year.
Surprisingly, the estimated unemployment rate has remained relatively unchanged at 3.9%, however, these figures are unlikely to reflect the full impact of the pandemic. With the Government’s furlough scheme winding down, economists have suggested this is only the ‘lull before the storm’ as stable headline figures mask the extent of a crisis that could see the unemployment rate almost double to 7.5% this year.
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