The consumer response to the reopening of shops across England at the start of the week points to a gradual recovery in a sector that is vital for any economic revival.
Spending and footfall remained well below pre-lockdown levels, according to an FT analysis of unofficial data covering the first three days of the reopening of non-essential stores in England, raising concerns about job losses in retail, where more workers are furloughed than any other sector.
A rebound in the retail sector is essential for the economy. It accounts for about 5 per cent of UK output and 9 per cent of jobs. The reopening of non-essential shops was “much needed to provide further support to the economy,” said Fabrice Montagné, an economist at Barclays.
But the initial analysis appears to bear out the warnings by analysts on Monday that pent-up demand — after almost 12 weeks of lockdown — could give false hope of a quick recovery in sales after a record fall in April.
The FT has sought alternative measures of retail activity, which have uncertain links to official data, because standard economic statistics are published with a significant time lag: the ONS is due to release May’s retail sales figures on Friday and June’s official data are not published until the end of July.
An initial jump in footfall across England — up 42 per cent week on week on Monday from very low levels — was not sustained during the following two days. Over the first three days since reopening it was up 30 per cent on average, according to data produced for the FT by Springboard, a retail consultant.
However, there are large variations across the country, according to the FT’s analysis of Google data that tracks footfall on an hourly basis across 30 UK shopping centres. Northern Ireland is the only other part of the UK where non-essential shops are trading after opening last Friday. The Welsh government may allow stores to reopen next week, while Scotland has announced it will lift the retail lockdown on June 29.
Intu’s Milton Keynes mall, in south-east England, registered the mildest contraction, with footfall down by about one-third on average over the first three days after reopening, in line with many shopping centres elsewhere in Europe, where the lockdown was lifted last month.
“Compared to other European countries — France, Germany, Italy and Spain — the UK is the last to start its recovery process, having already had the longest disruption,” said Andy Sumpter, a consultant at ShopperTrak. Italy, the first European country to go into lockdown, reopened just under 10 weeks later compared to just under 12 weeks in England.
Most of the shopping centres tracked by the FT, however, showed much more depressed levels, with many registering footfall at half pre-virus levels or lower. Across England, footfall is about half of last year’s levels, according to Springboard.
Gavin Prior, operations director at Intu, which has 17 shopping centres across the UK, including large ones such as Lakeside in Essex and Manchester’s Trafford Centre, said the early signs were “encouraging”.
On Monday only about 40 per cent of shops in the malls were open and he said footfall was expected to increase as more stores opened up after putting “the right safety measures in place” in the coming weeks.
Non-essential retail spending — which was down more than 80 per cent during much of the lockdown — recovered sharply on Monday to just 20 per cent below the levels on the same day last year, according to consultancy Fable Data, which collated information from various sources including credit and debit cards for the FT. But on Tuesday it fell back to 35 per cent down year on year.
Despite Monday’s jump, spending is well below pre-crisis levels, the analysis by Fable Data showed.
Ruth Gregory, senior UK economist at Capital Economics, warned that sales would remain weak as any recovery would be slow as it “may take some time” for footfall to recover.
She said consumers’ confidence about their finances remained close to recent lows, influenced by an outlook of rising unemployment. The number of employees on payroll fell by more than 600,000 in May compared with March.
Moreover, the 9.1m workers on the government’s furlough scheme have lost 20 per cent of their income since the lockdown and there is a concern many of those could lose their jobs in the months ahead.
“That’s why we think that there will be a sharp, though partial, recovery in consumption over the summer as the lockdown is eased, followed by a gradual further recovery in the subsequent months . . . Overall retail sales are likely to remain weak,” Ms Gregory said.
An incomplete recovery in retail would put many of the 1.6m furloughed shop workers’ jobs at risk. The reliance on the government wage support scheme is the largest of any sector, according to data from HM Revenue & Customs.
“Allowing shops to reopen . . . means that those businesses that were viable are more likely to survive,” said Yael Selfin, chief UK economist at the consultancy KPMG. “But given the extent of the downturn and the longer-term structural changes the industry is undergoing, unemployment will probably rise in the sector.”
Retail remains in a highly distressed state compared with other sectors, according to Opinium-Cebr. The consultancy’s latest Business Distress Tracker, conducted between June 5 and June 10, found the proportion of retailers reporting to be at risk of insolvency had fallen to 18 per cent from 40 per cent two weeks ago.
Retail jobs vacancies had risen by 40 per cent from April’s low, according to the FT’s latest analysis from the government job search website Find a Job on Thursday but they were still about half the pre-lockdown levels in late March.
“A mix of low consumer confidence and limits on the number of people able to enter stores means that many shops will continue to suffer lower footfall — and lower sales — for some time to come,” Helen Dickinson, chief executive of the British Retail Consortium warned at the start of the week.
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