UK Retail Sales: June 2022

In June, total UK retail sales value growth continued to slow, even as overall consumer price inflation accelerated. The total sector eked out a very modest 1.7% year-over-year value increase during the month. Adjusting for inflation, the year-over-year volume decline deepened to (5.9)%, according to the Office for National Statistics (ONS). Excepting the pandemic-hit months of April and May 2020, this continued to set a record for volume declines, based on the ONS’s current data set, which extends back to January 1989. 

In contrast to the continued upward trend in overall CPI, the ONS estimated that overall retail inflation leveled off in June, at 8.0%. This plateauing was driven by nonfood retailers, where implied inflation eased from 7.7% in May to 7.4% in June--likely reflecting weak discretionary retail demand restricting a further intensification of price rises. Food retailers’ implied inflation rate climbed further, from 8.2% in May to 8.8% in June. On June 16, the Central Bank of England implemented its fifth interest rate hike since December.

Figure 1. Total UK Retail Sales (ex. Automotive Fuel and Unadjusted): YoY % Change [caption id="attachment_152180" align="aligncenter" width="700"] Data in this report are not seasonally adjusted
Source: ONS/Coresight Research[/caption]   Retail Sales Growth by Sector The signs are that discretionary retail demand remains weak, although the patterns by sector are patchy and inconsistent (Figure 2). At a total level, nonfood retailers (a potential proxy for discretionary demand) saw year-over-year value growth climb from 3.0% in May to 3.4% in June (this metric is not tabulated in Figure 2). Department store/mixed-goods retailers, footwear specialists and furniture stores were among those that saw an improved trajectory in June. Meanwhile, DIY retailers, clothing stores and online pure plays (which are predominantly nonfood and discretionary) saw growth rates weaken. Grocery value growth remained stable but even here the ONS estimates volumes are declining: real-terms sector sales declined by 6.1% year over year in June, versus a 5.7% fall in May. Figure 2. UK Retail Sales, by Sector: YoY % Change [wpdatatable id=2147] *A small retailer is defined as one with fewer than 100 employees or with revenues of £60 million or less per year; all others are large retailers **A relatively fragmented sector, in which reported figures have traditionally been volatile Source: ONS   Online Retail Total online retail sales declined by 9.7% year over year in June, versus a 7.7% decline in May. Channel sales have declined meaningfully each month so far this year, with food retailers (sales down 13.8% in June) and household goods stores (which includes DIY and furniture; down 18.5% in June) driving the declines. E-commerce accounted for 24.8% of total retail sales in June, down from 25.7% in May. Covid-19 Lockdown Timeline Lockdown 1: The UK was put into lockdown on March 23, 2020, initially for three weeks, in an attempt to limit the spread of the coronavirus. Nonessential retail stores were closed. On April 16, the government extended the lockdown by another three weeks. On May 11, Prime Minister Boris Johnson announced that the government would begin easing restrictions in a phased manner, allowing nonessential stores to reopen from the start of June. However, garden centers were allowed to reopen on May 13 and furniture stores on May 23. On May 26, the government announced that all nonessential retailers in England and Northern Ireland—including department stores and small independent shops—would be allowed to reopen from June 15, but stores would need to implement measures to meet the necessary social distancing and hygiene standards. On June 23, Johnson announced that restaurants, pubs, museums, cinemas and hotels could reopen on July 4. On September 14, a new “rule of six” prohibited social gatherings of more than six people, unless they are from the same household. On September 22, Johnson outlined a slew of new restrictions in the wake of a fresh spike in the number of infections. These included the closing of bars, pubs and other hospitality services by 10:00 p.m., effective September 24. On October 7, the Scottish government implemented tighter restrictions, largely on the hospitality industry. Retail was not directly affected, although stores were requested to enforce two-meter distancing. On October 12, the UK government announced a three-tier lockdown system, which classified regions based on the severity of infection rates. In the week beginning October 19, a number of regions in England, including London and Manchester, moved into higher tiers of control, which include restrictions on households mixing and, in some cases, some service industries; however, these did not change the direct rules for retailers. On October 23, a 17-day lockdown began in Wales, with nonessential retailers being forced to close once more. Lockdown 2: On October 31, Prime Minister Johnson announced a second lockdown for England for the period November 5 to December 2. All nonessential retail was forced to close, “including, but not limited to, clothing and electronics stores, vehicle showrooms, travel agents, betting shops, auction houses, tailors, car washes and tobacco and vape shops.” Food shops, supermarkets, garden centers and certain other retailers providing essential goods and services could remain open. Nonessential retail could remain open for delivery to customers and click-and-collect. Hospitality venues such as restaurants, bars and pubs were forced to close but could still provide takeaway and delivery services. Also forced to close were entertainment venues, indoor and outdoor leisure facilities, and personal care services. Following the lockdown, UK regions were placed into different tiers, each of which had different restrictions. On December 8, the UK’s National Health Service started vaccinations, with the aim of vaccinating the most vulnerable groups of people by February 15, 2021. On December 21, the UK government scrapped a planned easing of rules on the mixing of households over the Christmas period. In England and Scotland, households in many areas were banned from mixing; in some areas, households could mix on Christmas Day only. The devolved Welsh and Northern Irish administrations implemented their own restrictions. Lockdown 3: On January 4, 2021, Johnson announced a lockdown in England, effective January 5 and with an unspecified end date but with laws formally expiring on March 31. Scotland, Wales and Northern Ireland also implemented lockdowns. On January 19, Scotland’s First Minister Nicola Sturgeon announced that that country’s lockdown would be extended until at least the middle of February. On January 27, the government announced that travelers arriving from “red list” countries must quarantine in hotels specified by the government. On February 22, the government laid out a roadmap to ending lockdowns in England. Restriction easing was planned to start from March 29, with nonessential retail stores and services such as hairdressers allowed to reopen from April 12, and final restrictions ended on June 21. On March 25, the UK lowered the Covid-19 risk level from four to three on a scale of five. On April 12, the government eased a raft of restrictions across England, with gyms, zoos, theme parks, pubs and restaurants allowed to reopen for outdoor service and shops and hairdressers again permitted to serve customers. On April 20, Sturgeon announced that Scotland would move to Covid protection level from four to three on April 26, meaning hospitality venues such as cafés, pubs and restaurants and beauty salons could reopen. On May 17, England eased restrictions further with groups of up to six people from different households allowed to socialize indoors. Pubs and restaurants were allowed to serve indoors again and entertainment venues such as museums, cinemas, and theatres reopened. On June 14, England delayed the final stage of easing lockdown restrictions by a month, until July 19, due to an increase in cases of the more transmissible Delta variant. After more than a year under some form of restriction, England lifted almost all remaining Covid-19 rules on July 19, 2021. This included the opening of nightclubs and lifting capacity restrictions on big events and performances. On December 13, British health secretary Sajid David announced that approximately 200,000 people nationwide had tested positive for the Omicron variant. On December 14 Prime Minister Boris Johnson put forth a new policy of mask mandates and proof of vaccine certification to enter nightclubs and other crowded public spaces. On January 19, 2022, Prime Minister Johnson lifted the mask mandate and the requirement of proof of vaccination to enter large or crowded places, signaling that the worst of the Omicron variant was over in the UK. On February 24, 2022, the legal requirement to self-isolate upon testing positive was removed in England as part of the government’s “Living with Covid” plan. Contact tracing of those testing positive and self-isolation for contacts of positive cases also ended in England. On March 18, 2022, all international travel restrictions, such as passenger locator forms and Covid-19 testing for unvaccinated travelers, were removed. On March 24, 2022, Covid-19 provisions attached to statutory sick pay were removed in England. Guidance on workplace risk assessments was also removed. On April 1, 2022, free universal Covid-19 testing was removed in England.