UK shoppers are remaining “cautious” about spending amid the growing number of COVID-19 cases despite retail sales edging up in June, experts have warned.
According to the latest figures from the Office for National Statistics (ONS), retail sales volumes increased 0.5 per cent in June month-on-month, but 9.5 per cent compared to pre-pandemic levels in February 2020.
While this came ahead of market expectations, analysts have warned that the boost was almost entirely down to “football fever” and other sporting events like Wimbledon and the Lions Tour boosting purchases of food and drink.
Growing challenges to the retail sector, including the sharp increase in delta-variant cases and the ‘pingdemic’ staff shortage crisis, has dampened optimism looking ahead among analysts.
“While Monday saw the last remaining COVID-19 restrictions lifted in England, people are still cautious going out and about, especially given the rise in cases and concern over potentially being required to isolate after being deemed a close contact,” EY’s retail partner Silvia Rindone said.
“While retailers focus on meeting demand, staff shortages may pose a significant challenge. UK delivery drivers have been affected by a combination of Brexit border delays, the furlough scheme and summer holidays looming. Retailers are also reporting a reduced workforce due to the impact of Brexit, increased competition from other employers post-reopening, and ongoing pandemic-related disruption as workers need to self-isolate.
“But the real test will come in September when the furlough scheme and business rates relief both come to an end. Companies that have taken advantage of the past 18 months to review their business model and adapt their operations will be in the best position.”
Hargreave’s Lansdown’s Susannah Streeter added: “The novelty of browsing in real instead of virtual stores hasn’t yet worn off. The amount of money we spent online fell in June by 4.7% compared with May, with shopping now entwined in our social lives once more.
Other research from the ONS this week showed that in July shoppers have continued to cool down from the hot pace of spending the sector saw in the spring. In the week to 15 July 2021, spending on debit and credit cards fell by five percentage points from the previous week, coming in at 92 per cent of the level in February 2020. A fall in social spending is partly behind the drop, with people splashing less cash on restaurants, hotels and air travel.
“Delayable spending on goods like clothing and cars is also at 85 per cent of the level in February 2020, indicating caution is once again becoming the name of the game, as concerns about the spread of new variants rise.”
Despite the growing issues faced by retailers and increased caution from shoppers, Barclays Corporate Banking’s head of retail and wholesale had a more optimistic view.
“Looking ahead, the reopening of hospitality and leisure may take some of the wind out of retailers’ food and drink sales in the short term – but clients I have spoken to seem optimistic, and are hoping that sales will continue to heat up over the rest of the summer.”