UK retail sales plunged by their biggest fall on record in March, official data showed today as retailers counted the cost of the coronavirus lockdown.
While food sales surged, overall UK retail sales plummeted 5.1 per cent last month compared to February, according to the Office for National Statistics (ONS).
That was much bigger than a Reuters poll prediction of a four per cent slump.
And it is the largest drop on record since the ONS began recording UK retail sales in 1996.
Clothing stores saw huge retail sales slumps of minus 34.8 per cent even though the coronavirus lockdown only started on 23 March.
And food sales and online-only firms were the only to see growth as the Covid-19 lockdown bit Britain’s retail sector. Supermarkets and other food stores recorded a huge 10.4 per cent jump in sales. And within that, alcohol sales jumped 31.4 per cent.
And online sales soared to be worth 22.3 per cent of all UK retail sales.
The ONS UK retail sales survey measured transactions between 1 March to 4 April.
The pound slipped 0.15 per cent against the dollar today, and its fall steepened following the data.
‘Gloomy’ data will persist until lockdown ends
Howard Archer, chief economic adviser to the EY Item Club, said coronavirus’ hit to the retail sector will be profound. “Apart from the food sector, the retail picture is gloomy and is likely to remain so until lockdown restrictions start to ease,” he warned.
“The near-term fundamentals for consumer spending have clearly taken a substantial downturn as a result of coronavirus. Some people have already lost their jobs, despite supportive government measures and incomes have also been affected.
“Furthermore, consumers are likely to adopt a much more cautious approach to discretionary purchases given the current uncertain economic environment.
“Online sales are coming increasingly to the fore, but they can only make up a limited amount of the lost business.”
UK retail sales leave shops in ‘crisis mode’
Richard Lim, CEO, of research firm Retail Economics, said the impact of coronavirus was two-fold. First shoppers cannot visit stores, and second, the economic impact on shoppers has led them to cut spending.
“Retailers are in crisis mode as the impact of Covid-19 has obliterated sales to new record-lows,” he said.
“The immediate shock to our lives has forced new shopping behaviours and a focus on essentials. But worries about health, job security and prospects for the economy are causing some consumers to cut all non-essential spending and hibernate.
April looks even worse for UK retailers
And Thomas Pugh, UK economist at Capital Economics, warned UK retail sales will suffer even worse in April.
He said a “further big decline is almost guaranteed” for this month, estimating a drop of between 20 per cent and 30 per cent.
“With widespread lockdowns only beginning around the middle of the March, retail spending looks like it will fall by much more in April,” Pugh said.
“Clearly there is huge uncertainty as to how deep the downturn proves and how long restrictions remain in place. A fall in the region of 25 per cent in GDP over the next few months seems likely.”
Fiona Cincotta, financial analyst at Gain Capital, added that a slow easing of the coronavirus lockdown could add to retailers’ troubles. “Without a vaccine it is highly unlikely that there will be a quick rebound in the retail sector,” she said.
“Even when the UK starts to ease lock down restrictions and reopen its economy there will almost certainly be restrictions on shops, with limits to customer numbers at any one time.”
UK fashion retailers worst hit – jobs at risk
The hit to clothing retailers evident in the UK retail sales will put pressure on those firms to slash jobs despite government support, analysts said.
“The trauma will be most acute for apparel retailers, who are desperately managing cash flow to try and keep working capital above the water,” Retail Economics’ Lim added.
“Despite an unprecedented government support package, we have already seen some retailers fall into administration and it is inevitable that more will follow.”
Ulas Akincilar, head of trading at Infinox, added: “High street fashion retailers face a wasteland of zero sales and piles of unsold stock which will be steadily going out of style. While online sales remain brighter, and several online only brands have been bullish about their prospects, it’s an open question how keen people are to dress up just to slouch on the sofa all day.”
Akincilar added that the UK’s consumer-led economy has “ground to a halt” and now “tens of thousands of retail jobs hang in the balance”.
“This may have been widely expected, but the markets’ verdict is likely to be brutal,” he said.