This morning in the UK we had data from the British Retail Consortium which measures retail sales. Since the end of the November lockdown, retail sales had increased by 1.8% in December. But, that positive note is overshadowed by the fact the UK introduced further restrictions in mid-December, leaving retail sales for the year down 0.3% compared to 2019.
Since economic releases throughout the year have been breaking records, it probably doesn’t come as a surprise that this is also the worst performance in their 25 years worth of data.
Getting the virus under control and the economy back open is one of the main priorities of the UK government. However, this will largely depend on how quickly and effectively a vaccine can be distributed.
A member of the monetary policy committee at the Bank of England warned yesterday that even if we get the economy back open relatively quickly, spending will still take time to pick up since “consuming many of these services takes time”.
Barclaycard, which tracks almost half of UK card transactions, also said it saw consumer spending drop 2.3%, year on year in December. However, on a positive note they also said consumer confidence was beginning to increase again as spending on non-essential items increased.
Even if consumer confidence is on the rise, another lockdown is currently in force and retail, particularly non-essential is going to be under pressure once again undermining any positive news from December.
The spillover effect is also becoming even more apparent as commercial landlords see a shortfall in rental payments, with one of the biggest commercial landlords in the UK saying they’ve only received 46% of rent owed for last quarter.
Further data from property company Re-Leased shows that out of 35,000 companies analysed, only 54% of retailers have paid what’s owed for the end of the year. This is a significant decline from last year's 75%.
There is a government moratorium to protect against evictions until March, but retailers could still be facing a breach of covenants with their lenders, due to being forced into lockdown.
As the data suggests, the entire retail sector is under financial pressure without any signs it’s coming to an end soon. So far the UK government is working to a March deadline, but this isn’t set in stone and depends on containment of the virus.