Retail sales: are UK retailers on the road to recovery - what the latest ONS data tells us

Retail sales recovered slightly in February amid a third national lockdown, according to new figures published by the Office for National Statistics (ONS).

Spending on garden furniture and household goods helped the sector bounce back after a lowly slump in January brought on by the temporary closure of non-essential shops.

Many took to online shopping to acquire goods in preparation for further relaxing of Covid lockdown restrictions and the hope of warmer weather in the weeks ahead.

But analysts warned there is still a long way to go before spending hits pre-pandemic levels.

How much did retail sales increase?

Retail sales increased by a modest 2.1% in February on the heavy fall of 8.2% in January.

DIY stores such as B&Q have continued to enjoy growth in sales with ONS data suggesting outdoor furniture has been in demand ahead of lockdown restrictions easing.

The Rule of Six, which is expected to come in on 29 March, is likely to have driven sales of garden equipment as families and friends prepare to meet up again over Easter.

Retail spending increased by 2.2% compared to a month earlier as household goods and department stores experienced a 16% hike in sales in the same period.

How does this compare to pre-pandemic levels?

Though a return to positive spending in the ONS figures is encouraging for retailers and the economy, it remains 3.7% down on 12 months earlier and before the Covid pandemic hit.

Clothing retailers have been the hardest hit by the lockdown, with ONS data stating the sector has experienced a 50.4% reduction in sales when compared to February 2020 levels.

There was also a 26.5% fall in petrol stations expenditure, with the stay at home order in place.

Generally, businesses that depend on face-to-face interaction have suffered the most at a time when online retailers continue to enjoy huge gains in customer spending.

More than a third (36.1%) of the overall cash spent at retailers in February went to those businesses operating online - up from 20% a year ago before the pandemic.

UK stores have now lost a “whopping £27 billion from lost sales” during the three lockdowns, according to British Retail Consortium CEO Helen Dickinson.

“This is already impacting retail employment, with 67,000 retail jobs lost between December 2019 and 2020,” she added.

What does the future look like for retailers?

It’s clear there has been a huge shift to online sales during the pandemic as shops have had to deal with frequent closures to limit the spread of the respiratory coronavirus.

Analysts at Handelsbanken said the progress to online spending over the last 12 months was now at levels they had previously expected would take 10 years, prior to the pandemic.

There seems to be a split in opinion between what impact reopening physical shops will have.

James Smith, developed markets economist at ING, suggested the pent-up demand is more likely to focus on services and online sales could stay high.

He said: “Unfortunately, the combination of these two factors means it’s likely to be a further challenging time for traditional high street retailers (or those without a well-developed online offering).

“These businesses will also be vulnerable when support measures such as the commercial eviction ban are removed later in the year, given many are perceived to be behind on rent payments due to the pandemic.

“Further signs of consolidation are therefore likely on the high street over the coming months, which may result in higher unemployment in the sector.”

When does non-essential retail open?

Under the government’s roadmap out of a third national lockdown, non-essential shops and retail stores in England are expected to reopen on 12 April.

It is hoped a four-staged approach to gradually relaxing Covid enforced restrictions will lead to all legal limits placed on society being lifted by 21 June.