Coronavirus: Retail sales 'deeply depressed' with firms 'up against it'

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A sign in the window of a closed small business in Cardiff, United Kingdom. (Matthew Horwood/Getty Images)

Retail sales remain “deeply depressed” in May, according to a new survey of businesses.

The Confederation of British Industry (CBI) said a survey of 87 retailers found a balance of -50% reported a fall in sales so far this month compared with the same time last year.

As well as denting consumer demand, the survey found the COVID-19 pandemic was causing other problems for shops. 58% reported shortages of goods, 64% faced rising costs, and 44% said they were struggling with shipping delays. 80% of retailers said they were in financial difficulty.

“The retail sector is at the sharp end of a crisis, with many businesses up against it,” Rain Newton-Smith, the CBI’s chief economist, said in a statement.

Retailers such as Laura Ashley, Debenhams, Oasis, and Cath Kidston have all collapsed into administration since the pandemic hit.

Read more: 2,700 jobs at risk as Laura Ashley collapses and blames Covid-19

However, Newton-Smith said government support had so far limited the damage.

“The government’s support packages are making a real difference, with more shops reporting that jobs have been furloughed, rather than lost,” he said. “The furlough system will need to adapt as more businesses open their doors in the months ahead.”

May’s sales decline was not as bad as expected and marks a slightly moderation on April’s figure. Retailers expect sales to improve slightly in June, with non-essential shops allowed to re-open from the middle of the month.

Read more: Oasis and Warehouse collapse with 1,800 more job losses

However, the CBI said the expected collapse in sales was still “historically fast” and showed the sector was “deeply depressed.”

“As we gradually reopen the economy, retailers may yet need more support from the government if demand falters,” Newton-Smith said.

“Ensuring safety in the workplace remains the top priority, as more firms look to bring staff back to work. Many challenges remain in managing supply chains and costs in a tough environment.”

Read more: Debenhams to file for administration, putting 22,000 jobs at risk

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said a swift recovery in sales when non-essential businesses reopen was unlikely.

“Consumers’ spending in shops likely will be well below pre-virus levels, given the lingering risk of contracting Covid-19 and the recent surge in unemployment, which has hit households’ overall income and will make those working less willing to purchase discretionary goods,” Tombs wrote in a note sent to Pantheon clients.

Retailers have slashed their new stock levels in the face of slumping consumer demand. Orders to suppliers fell by 56% in May, the CBI survey found.

Earlier on Tuesday, figures from Lloyds Bank showed non-essential spending fell by 42% in April as the country adjusted to life under lockdown.