UK retail sales boost consumer hopes but clouds gather

John Lewis Partnership, which has also closed branches and axed jobs, said this week that it won’t pay staff an annual bonus for the first time in more than 70 years.

UK retail sales extended their recovery in August as a British government initiative to boost the hospitality industry lured locked-down Britons out to the shops.

The volume of goods sold in stores and online rose 0.8% from July, the Office for National Statistics said.

It marked a fourth month of growth following an unprecedented slump in April, when the government ordered most stores to close to help fight the spread of coronavirus. 

Sales excluding auto fuel rose 0.6%, stronger than economists forecast.

The figures may boost hopes that consumer spending -– the engine of the British economy -- is bouncing back strongly. 

Sales volumes are now at record levels and 4% above their pre-pandemic levels. 

Non-essential stores were allowed to reopen in June.

August saw millions in the UK take advantage of government-subsidised meals under the Eat Out to Help Out programme. 

This almost certainly helped retailers by bringing consumers back to town centers.

But the headline data mask varying fortunes across the retail industry. 

With much of the country still working from home, online sales are 47% higher than before the pandemic, and there has been healthy demand for food and household goods. 

By contrast, clothing sales remain well below, and many major retailers are under pressure.

Companies including Marks & Spencer, WH Smith, and Dixons Carphone have announced plans for thousands of job cuts. 

In the latest sign of the troubles in the sector, John Lewis Partnership, which has also closed branches and axed jobs, said this week that it won’t pay staff an annual bonus for the first time in more than 70 years.

And economists fear the retail recovery could prove short-lived. 

While the economy is reopening, the UK is facing multiple threats that could prompt policymakers to increase fiscal monetary and fiscal support.

Meanwhile, the one of the largest landlords in London's West End's says tenants are still struggling to pay their rents.

The Crown Estate, the £13.4bn (€14.7bn) property firm that helps pay for Britain’s monarchy, says customers are only slowly returning to the West End’s shops and restaurants as they reopen after lockdown. 

Now the landlord, which owns swathes of the city’s shopping and entertainment district, is bracing for a further financial blow as a potentially brutal winter and new spike in virus cases looms.

“We are under no illusions about the challenge ahead,” Dan Labbad, chief executive officer of the Crown Estate, said in a media briefing. 

“We do expect our financial performance to be significantly down in the next financial year.”  

Bloomberg