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UK retail sales collapse in lockdown

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3 min read
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A pedestrian passes a closed jewellery shop in the Mayfair area of central London. Photo: Tolga Akmen/AFP
A pedestrian passes a closed jewellery shop in the Mayfair area of central London. Photo: Tolga Akmen/AFP

UK retail sales fell sharply last month as a return to lockdown stopped people spending.

Data from the Office for National Statistics (ONS), published on Friday, showed sales fell by -8.2% in January. Economists had forecast a -2.5% month-on-month decline.

The ONS said the data showed "a steep decline in the sector, as it was again affected by coronavirus (COVID-19) restrictions."

"Feedback from retailers suggested that these enforced closures affected sales, although not to the same extent as witnessed in April 2020 (the first full month of restrictions on the retail sector) when total retail fell by 22.2%," the ONS said.

Retail sales collapsed by 8.2% last month. Photo: ONS
Retail sales collapsed by 8.2% last month. Photo: ONS

January's decline followed near-flat sales in December. November's month long lockdown had sent retail sales into contraction for the first time in six months. Sales are currently 5.5% below pre-pandemic levels, the ONS said.

Jace Tyrrell, chief executive at New West End Company, which represents 600 businesses on Oxford Street, Regent Street, Bond Street and in Mayfair, said the data showed the "profound effect" of lockdowns on retail businesses.

“Six weeks into the new year, and the retail and hospitality sector has already had to forego vital trading moments such as the January sales, Chinese New Year, and Valentine’s Day," Tyrrell said.

While almost all sectors saw sales declines last month, the return to national lockdown provided a boost to online businesses. Non-store retail sales rose by 3.7% in January and online spending accounted for 35.2% of the market last month — a record high.

"Anecdotal evidence suggested that during the current period of restrictions, improved online capability and click and collect purchases helped to lessen the impact," the ONS said.

Food retailers also saw a modest increase in sales, rising by 1.4%. Clothing stores were the worst hit by the lockdown, with sales down by 35%.

UK prime minister Boris Johnson is set to publish the government's roadmap out of lockdown on Monday. Schools are set to be prioritised, followed by non-essential retail. Bars and restaurants are set to among the last businesses allowed to reopen. The exact timing is yet to be decided.

"It probably won’t be until late March at the earliest that non-essential retailers can open their stores again," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"What’s more, households’ disposable incomes will be undermined in Q2, when the Coronavirus Job Retention Scheme and the Self-Employment Income Support Scheme will cease, the £20 per week top-up to Universal Credit will end, and mortgage payment deferral schemes will be wound down.

"Households also likely will prioritise spending more on services than goods, once they have been vaccinated and businesses have reopened. Accordingly, retail sales likely will not surpass last October’s peak on a sustained basis later this year."

WATCH: Boris Johnson warns of 'cautious' approach to easing lockdown