UK retail’s remarkable recovery set to stall

The UK economy regained ground over the summer as business reopened, but nowhere has this recovery been more visible than in retail. Retail sales were already almost back to pre-virus levels in June and have exceeded them in the months since.

But this remarkable progress may be beginning to run out of steam. While sales increased by another healthy 1.5% over September, the latest readings from the ONS business impact survey (a wide-ranging questionnaire on the impact of Covid-19) suggests that retailers are beginning to see their turnover level-off - and the latest round of government restrictions will add further pressure.

Wales has become the first area in the UK to close non-essential retail once again, which we estimate accounts for just under 5% of employment in this sector in Great Britain (a little lower than that if the data were to include Northern Ireland). That implies that we could potentially see overall retail sales slip lower again in October or November.

But while the latest restrictions in England and Scotland are not as restrictive for retail at this stage, there will still undoubtedly be an impact. The closure of hospitality will reduce demand for some products. Clothing and footwear stores have seen their sales gradually recover through the summer, but this could begin to stall yet again. Pub and restaurant closures will also see reduced footfall in high-street/city centre areas, which was already well below pre-pandemic levels according to Springboard data published by the ONS.