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Retail sales up again but UK economic recovery ‘likely to diminish’

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Retail sales volumes in August increased 0.8% – the fourth consecutive month of growth. But analysts fear the UK economic recovery may rapidly diminish.

The sales volumes for August were up 4% when compared with the pre-pandemic level in February, according to the Office for National Statistics.

Meanwhile it noted that the retail sales values for the month were up 0.7% when compared to July, and 2.5% when compared with February.

The ONS said “there was a mixed picture” within different store types as non-store retailing volumes were 38.9% above February’s figure, but clothing sales were still markedly down by nearly 16%.

Consumers instead favoured spends on home improvements as the household goods sector reported a 10% increase since February.

Food stores continued to see an increase in spend – a 4.4% rise from the previous year. But they reported a decrease in footfall between 10 and 23 August, which may have been down to other parts of the economy opening, such as restaurants and bars, along with the government’s flagship Eat Out to Help Out food discount scheme which ran in the month of August.

While many fuel stations remained open during lockdown, movement restrictions, including homeworking, had reduced travel and volume sales fell by 24.3% in 2020 as a result.

Online retail sales were unexpectedly down 2.5% in the month to August but the ONS said that the strong growth seen over the lockdown period mean these sales are still 46.8% higher than February’s pre-pandemic level.

‘Huge uncertainty remains for shops’

Alistair McQueen, head of savings and retirement at Aviva, said the data shows the scale of the recovery in consumer spending as the UK emerges from lockdown. “However, this may not be enough to ease mounting concern over the fragility of the UK economy.”

He said: “The government’s ‘Eat Out to Help Out Scheme’ provided a shot in the arm for the hospitality sector. More time spent at home has partly driven people to spend more on home improvements, while seasonally high footfall at pubs and bars are likely translating into robust sales figures.

“However, consumers’ role in stimulating the UK’s economic recovery may rapidly diminish soon. Fears over a probable surge in unemployment and sharp income falls are mounting due to the winding down of the furlough scheme. The re-imposition of local lockdowns and the introduction of the ‘rule of six’ measures are expected to hit confidence levels, causing spending to drop as households cope with high uncertainty once again.”

Aled Patchett, head of retail and consumer goods at Lloyds Bank, said: “August proved a far better month than most retailers expected, with many market towns and retail parks benefitting from increased footfall as consumers holidayed at home and fears around Covid-19 eased for a short while. However, there remains huge uncertainty for shops, particularly those in city centres.

“With the autumn / winter season set to be characterised by uncertainty and increased social restrictions, we can expect to see further changes across the sector as businesses look to reshape their models for a ‘Covid Christmas’. Naturally, there is growing anxiety among those who bank on a successful golden quarter given the impact social distancing could have on this year’s festivities.”

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