Retail sales in the UK plunge by 19.1% in April 2020- BRC Survey

The British Retail Consortium, the trade body for the retail industry in the United Kingdom, has reported that sales in the industry have plummeted by at least 19.1 per cent compared to the same period last year because of the lockdown that the country has been in since 23^rd March 2020. Though there is a massive fall in revenue when looked at in absolute terms, the number does not seem to be very discouraging compared to revenue from other industries who have been witnessing a much worse performance. The drop in shop sales was picked up quickly by the online purchasing by customers who wanted to stay at home to protect themselves from contacting the information. The online retailing segment has in fact seen a massive growth in the past few days raising the fortunes of many a company operating in this space. This growth, however, is not evened out across all commodities and sub-segments within this industry and is restricted to most food items and toiletries. In months to come when the lockdown restrictions are gradually eased a better performance can be expected from the sector while currently, it will have to make do with whatever it is getting.

Many a report about the current state of health of the British economy has revealed that it is going to shrink by about a third in the April to June quarter this year. When compared to that, the performance of the retail industry has been not that bad. In fact the online retail industry has been one of the shining stars along with few other industries which has ensured that some business activity remains up and running in the country while most are reeling under the effect of the coronavirus pandemic. Brick and mortar retail and supermarkets employ a lot of skilled and unskilled people who not only assist in sales, but also in housekeeping and maintenance who are currently sitting without work. Keeping staff who are without work is an un-necessarily expensive proposition for the industry, and it won’t be able to support it for long. The government might have agreed to pay 80 per cent salary of these employees, but when the government support is withdrawn, the retail companies may not be in a position to support the financial burden of these people. It can thus be said that many of these retail companies have been able to keep their operations open because of the support given by the government and not only on account of the market demand. It will be interesting to see how these businesses continue to perform in the coming months when the lockdown conditions are gradually withdrawn and along with government support.

The retail sector in the United Kingdom is one of the largest industry segments in the country, it not only employs a lot of people but also supports a significant number of small-scale industries and independent businesses. Right from farmers who produce milk, and vegetables to other grocery items, to tailors working form small and medium-sized apparel manufacturing companies, all have their fortunes linked to the retail sector. In the post lockdown periods when the movement of only essential food items and toiletries was allowed many of these other downstream companies started to suffer, rendering several without a livelihood. In the post lockdown period, when the restriction on movement of people partially gets lifted, the fortunes of many of these businesses could see an upsurge, with the pent-up demand.

Barclaycard, which is the credit card and debit card division of Barclays bank, has also reported that it has witnessed a significant slump in spending behaviour of its clients. It has reported that the spending has dropped by at least 36.5 per cent this year during April compared to the corresponding period last year. The banks stated that people due to the lockdown have surely saved a lot of money for its customers who have not been to pubs, restaurants, and other recreational places in over one and a half months. This shift in consumer behaviour though is predictable due to the fear factor that has homed itself in the minds of people but is also a sign that a huge pent up demand is slowly building which may see a sudden surge in revenues of businesses across the country when the dust settles of the pandemic. The retail sector and especially the large supermarkets and malls could also see a sudden spurt in footfalls as and when that happens since they also harbour pubs, restaurants, and other recreational activities within their premises.

The office of the budget responsibility suggests that the British economy will shrink by at least 13 per cent in the full year 2020 before a lot of its strength next year. The phased reopening of the lockdown leaves a lot to uncertainty if there will be a resurgence in the number of infections due to this relaxation, whereby the government has to take it back or the economy opens progressively without facing much of the challenge. The government has also said that it will only be able to give a relaxation to the industries which experience high footfalls in the third stage of its graded lockdown withdrawal when it feels that there are not many cases of the spike in the number of infections in the first two stages. This process thus could very well elongate to the last quarter of the year for the brick and mortar retail industry in the best-case scenario. In the meantime, a weakness in this segment of the industry will continue.

The online retail segment, however will continue to perform well and could even see more growth than what has been witnessed in the past few months. It will also be interesting to see what all regulations the government brings in to spur growth in this industry.