U.K. retail sales fell more than twice as fast as expected in January as the latest national lockdown closed stores in what’s traditionally a busy period with post-holiday discounts.
Sales in shops and online fell 8.2% after posting a small increase in December, the Office for National Statistics said Friday. It was worse than the lowest forecast and the third consecutive downside surprise.
While the reading was less severe than the 18% drop during the first lockdown in April, it underscores the toll the restrictions are taking on retailers. All non-essential stores to shut for weeks at a time, damping clothing sales and shifting activity to the web.
Retail sales volumes were 5.5% lower than before the pandemic in February 2020. Britain’s three lockdowns have cost the industry 22 billion pounds ($31 billion) in lost sales, according to the British Retail Consortium.
At least a fifth of the stores on London’s shopping hub Oxford Street are permanently closed and will not reopen after the lockdown ends, according to data from the New West End Company, a lobby group for businesses in the area.
The pound looked through the retail sales data, and was hovering steady below $1.40, a level not breached since April 2018. The currency is benefiting from the U.K.’s rapid vaccine rollout as well as a broadly weaker dollar.
Among retailers, all sectors saw a monthly decline in volume sales in January 2021 except for non-store retailers and food stores.
The proportion spent online soared to 35.2% in January 2021, the highest on record. The Bank of England has said it thinks consumers are starting to adapt to lockdowns.
Prime Minister Boris Johnson hopes a rapid vaccination program will allow stores, restaurants and bars to reopen by the summer, boosting employment and luring back shoppers. Analysis by McKinsey & Co. found that consumers may stick with e-commerce, keeping that part of the industry at 50% to 75% of the peak they enjoyed during the pandemic.
Consumer confidence remained low this month, even as Britons became slightly less pessimistic about their own financial outlook, according to a separate survey by GfK.
“Positive tailwinds of the vaccination roll-out are being met by the very strong headwinds of unemployment, the threat of inflation, and the difficulty that many face in affording day-to-day living costs — all serious issues that can dampen consumer confidence,” said Joe Staton, client strategy director at GfK.
A separate report showed U.K. government borrowing climbed to 270.6 billion pounds ($378 billion) in the first 10 months of the fiscal year, highlighting the challenge facing Chancellor of the Exchequer Rishi Sunak to return the public finances to a sustainable path.
The figures are the last snapshot before Sunak announces his budget on March 3. Britain is facing the largest deficit in peacetime and pressure is building on the chancellor to add to it by extending pandemic support programs including furlough payments that are due to expire over the coming weeks.
— With assistance by Lizzy Burden, Andrew Atkinson, and John Ainger