Rangewell’s report on the economic performance of the Wholesale & Retail Sector during the Coronavirus pandemicPublished on 27th October 2020 2020-10-27T01:52:26+00:00
There is significant evidence to show that wholesale & retail, as a sector, was one of the fastest to recover when restrictions were eased in June, but still one of the hardest hit from the economic fallout of Coronavirus. The anecdotal testimony of the consequences of the crisis has been prevalent since February, and now the economic data seems to support the ‘word on the street’.
- The GDP data show when restrictions were at their highest during the lockdown, the sector was 38% down from it’s February output. By July, the sector had bounced back to its February levels.
- Overall footfall decreased to below 70% of its level in the same period of last year.
- In September 2020, retail sales volumes increased by 1.5% from August; this is the fifth consecutive month of growth.
- In the three months to September, retail sales volumes increased by 17% when compared with the previous three months; this is the biggest quarterly increase on record as sales picked up from record-low levels experienced earlier in the year.
- Clothing sales have struggled to bounce back to their February levels, remaining 13% down in September compared to February. While sales in household goods, such as DIY and electrical items, did well - increasing 11% above their February levels.
- ONS data found that 73% of workers in the sector returned to working at their normal place of work by 22 October, while only 50% of business in the retail & wholesale sector applied for the Coronavirus Job Retention Scheme.
- Only 47% were successful when they applied to the government-backed accredited loans. Of those who applied to a Government-backed scheme, 88% found it helped to continue trading.
- The ONS found that 88% did not reserve financial assistance from banks or building societies. Of those who did gain funding from a bank, 98% said it helped their business continue trading.
- The IHS Markit UK Household Finance Index in September showed that there was a reduction in household spending, savings and personal credit availability, while the Financial Conduct Authority recently estimated that 12m people are struggling with bills or loan repayments as a result of the pandemic, with under 35s the most likely to be affected. The shortage of money in the British public’s pockets will have a knock-on effect on the long-term recovery of the sector.
Wholesale & Retail Sector GDP
Like with all other industries, Wholesale & Retail saw a dramatic drop of 38% in output while the cases and Government restrictions rose. While other sectors struggled to return to their February levels, Wholesale & Retail saw its output bounce back in July.
Monthly output (March, April, May, June, July, August 2020) as a proportion of February 2020 output; February 2020 output = 100% Source: Office for National Statistics, GDP monthly estimate, UK: August 2020: PHE Weekly Cases data, people tested positive, UK Whole.
In the week ending 18 October 2020, overall footfall decreased to below 70% of its level in the same period of the previous year.
Many non-essential shops were allowed to open on 15 June 2020 in England, 12 June 2020 in Northern Ireland and 22 June in Wales. In Scotland, some non-essential shops were allowed to reopen from 29 June, and more from 13 to 15 July.
Retail Sales Volume & Value
Retail sales volumes continued to increase over five consecutive months, after the sharp drop in February.
September saw the value of retail sales increase by 1.4% and volume sales by 1.5% when compared with the previous month. When compared with February 2020’s pre-pandemic level, retail sales were 3.9% and 5.5% higher in value and volume respectively. A strong rate of growth is seen in the three-month on three-month growth rate at 17.7% and 17.4% for value and volume sales respectively. This is the biggest quarterly growth seen on record as sales recovered from the low levels experienced earlier in the year.
In September, clothing sales were 12.7% lower than in February, while department stores were 0.9% lower. Volume sales in household goods stores and “other” non-food stores increased to 11.0% and 10.7% above February, respectively. Feedback from household goods stores had informed the ONS that home improvement sales from DIY and electrical goods stores did well in to help with the recovery of sales.
Chart shows the March to September sales as a proportion of February 2020 where February sales equals 100%. Source: Office For National Statistics, Business Impact of COVID-19 Survey (BICS), 22 October 2020: PHE Weekly Cases data, people tested positive, UK Whole.
The proportion of online spending peaked during lockdown and still remains higher than in February.
Online sales rose across all sectors when compared with the same time a year earlier. This is because of online sales reaching higher than usual levels over the course of the pandemic. Department stores were the only stores to increase sales in September when compared with August. Feedback to the ONS from these stores stated that the online pre-ordering of a new range of gaming products helped boost their sales.
Despite monthly declines across all sectors except department stores, the proportion of online sales was at 27.5%, compared with the 20.1% reported in February. The proportion of online sales increased across all sectors with food stores nearly doubling their online proportions from 5.4% in February to 10.4% in September.
Will further restriction hurt the industry?
The data indicates there could be longer-term effects on the sector, with household income being squeezed, but there is clear induction that financial support - partially from the Government-back schemes - has had a positive impact, which helped businesses within wholesale & retail continue trading.
The Financial Conduct Authority recently estimated that 12m people are struggling with bills or loan repayments as a result of the pandemic, with under 35s the most likely to be affected. The shortage of money in the British public’s pockets will have a knock-on effect on the long-term recovery of the sector. This is supported by the IHS Markit UK Household Finance Index which, in September, showed there was a reduction in household spending, savings and personal credit availability.
Data from the Office For National Statistics, Business Impact of COVID-19 Survey (BICS) on the 22 October 2020 in the Wholesale & Retail sector found:
- 73% of workers in the sector returned to working at their normal place of work.
- 50% have applied for the Coronavirus Job Retention Scheme, 80% of them were successful.
- 33% have applied to the government-backed accredited loans, 47% of applicants who applied were successful.
- Wholesale & Retail businesses: 36% applied for business grants funded by the UK and devolved governments,17% applied for business rates holiday, 22% applied to defer VAT payments, 8% applied to the HMRC Time To Pay scheme.
- Of those who applied to a Government-backed scheme, 88% found it helped them to continue trading.
- 88% did not receive financial assistance from banks or building societies. For those who did gain funding, 98% said it helped their business continue trading.
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