UK retail sector hit by supply shortages as sales continue to fall

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Retail sales volumes fell a further 0.9% in August, extending a 2.8% drop seen in July, as retailers struggled to get much needed supplies delivered.


Food store sales volumes fell 1.2%, the Office for National Statistics (ONS) said, with people opting to eat and drink at restaurants and bars as Coronavirus (COVID-19) restrictions eased. Non-food stores saw a 1.0% drop, driven by declines in department stores, sports equipment retailers and computer stores.


However, automotive fuel sales volumes bucked the trend, rising 1.5% in August, as the public got back into their cars for summer ‘staycations’, but remained 1.2% below pre-pandemic February 2020 levels.


The proportion of retail sales online rose to 27.7% in August from 27.1% in July, substantially higher than the 19.7% in February 2020 before the pandemic.


The ONS said 6.5% of retailers reported they were unable to get the materials or goods needed from within the UK in the last two weeks. Department stores struggled the most, with 18.2% experiencing problems with deliveries, followed by clothing stores at 11.1%.


Another 8.9% of businesses in the retail industry reported said they were able to get the materials, goods or services needed from within the UK in the last two weeks, but had to change suppliers or find alternative solutions. Over 22% of food stores reported this, followed by 18.8% of fuel stores and 11.1% of clothing stores.


Commenting on the figures, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “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.”


Analysts at Capital Economics said the fall in retail sales in August is not as bad as it looks as some of it reflects households spending more on non-retail items as life returns closer to normal.


“But as non-retail spending isn’t soaring, the economy probably didn’t regain much momentum after stagnating in July.”


Martin Beck, senior economic advisor to the EY ITEM Club, said: “Looking forward, the normalisation of spending patterns is likely to remain a key theme. But there should be some mitigation from the fact that the environment for consumer spending is very positive, with no restrictions on domestic mobility, household incomes resilient, and some consumers sitting on large levels of excess savings. So, while the extent to which the retail sector outperforms the wider economy should continue to narrow in H2 2021, the EY ITEM Club expects this to mean that retail sales stabilise, rather than continue to fall.”

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