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UK retail sales crippled by shortages and supply disruption

·3 min read
London, United Kingdom, June 28, 2021: People are seen shopping at landmark Oxford Street as the Coronavirus lockdown has not been fully lifted and number of Covid cases soars again. PM Boris Johnson says full ease of restrictions next month very likely. (Photo by Dominika Zarzycka/Sipa USA)
August was an underwhelming month for retail sales as macro issues put a dent in consumer spending, said one expert. Photo: PA

Retail sales volumes fell in the UK in August as businesses struggled with supply chain issues and labour shortages.

The Office for National Statistics said retail sales volumes were down by 0.9% in August, following a 2.8% fall in July – although they were 4.6% higher than their pre-pandemic February 2020 levels.

“After July’s sharp dip, August was another underwhelming month for retail sales as macro issues put a dent in consumer spending,” said Lynda Petherick, head of retail at Accenture UKI.

She said that while the easing of self-isolation rules, summer staycations and hospitality restrictions helped maintain a healthy level of consumer spending, the continued impact of labour shortages and supply chain disruption "weighed heavy on the sector, in a month that was characterised by images of bare shop shelves and delayed deliveries."

Stuart Cole, head macro economist at Equiti Capital said the numbers "will stoke further fears that the pace of the UK economic recovery is slowing and that the revival in consumer demand has already peaked."

He said the lack of willingness being shown by the Bank of England to bear down on rising inflationary pressures "may be compounding this reluctance to spend as households opt to tighten their belts now against the prospect of higher prices still to come."

"With announced tax rises already in the pipeline and the chancellor expected to announce further government spending cuts in next month’s budget, the outlook for UK consumers going forward looks increasingly uncertain."

Food store sales volumes fell by 1.2%. This is possibly because the further easing of hospitality restrictions meant people were spending less time at home and spending more money on eating and drinking out.

Non-food stores reported a fall of 1% in sales volumes in August 2021, driven by falls in department stores (-3.7%) as well as stores selling items such as sports equipment and tech (-1.2%).

Businesses were asked if they were able to get the materials or goods they needed from within the UK in the last two weeks.

6.5% of retail businesses said they couldn’t do so. Department stores suffered the most at 18.3%, followed by clothing stores at 11.1%.

Read more: European stock markets in positive mood despite fall in UK retail sales

Another 8.9% could get what they needed, but had to change suppliers or find alternative solutions in order to do so. Over 22% of food stores reported this.

“Shoppers and shops were stymied by shortages in August. Keeping the shelves full was a real battle, especially for department stores, which is one reason why we spent less in these stores in August. Supermarkets had a fight on their hands to keep supply chains flowing, but the might of these retailers meant they were able to track down alternative suppliers so we could keep filling our trolleys," said Sarah Coles, personal finance analyst, Hargreaves Lansdown.

Meanwhile Petherick said "the horse may have bolted for businesses who haven’t already acted to sure-up their supply chains."

"Order fulfilment and securing stock will be challenging, while many brands could find themselves short-staffed over this busy time. Without meticulous planning, consumers may be forced to get creative this Christmas if retailers can’t meet their needs.”

A bright spot in the figures was automotive fuel sales volumes, which rose by 1.5% in August, and the proportion of retail sales online rose to 27.7% in August 2021 from 27.1% in July, substantially higher than the 19.7% in February 2020 before the pandemic.

Watch: What is inflation and why is it important?

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