Brexit and the Covid-19 pandemic have had a major impact on the retail sector in the UK, causing significant supply chain issues, according to a report by the Confederation of British Industry (CBI). The report highlighted both positive and negative trends in the industry.
Despite the challenges, the report revealed that retail sales in the year leading up to August grew at the fastest pace since December 2014. Orders also reached a survey record high, and sales were viewed as above average for this time of year, indicating strong consumer demand.
However, the report noted that stock levels have plummeted due to a combination of worker shortages and transport disruptions resulting from Brexit and the ongoing pandemic. This has led to a record low in stock levels for the retail and distribution sector, marking the fifth consecutive month of decline.
Furthermore, the report showed that the proportion of deliveries from suppliers accounted for by imports has decreased significantly, at one of the fastest rates in the survey’s history.
The survey, which included 104 companies, revealed that while firms anticipate a slowdown in orders and sales growth in the next month, they still expect them to remain strong. Average selling prices in August saw the fastest increase since November 2017, with respondents predicting a similar trend in the upcoming month.
Despite the operational challenges faced by the industry, investment intentions for the next 12 months have increased and reached their highest level since February 1994. Overall, retailers anticipate a slight improvement in the business situation in the coming quarter.
Commenting on the findings, Alpesh Paleja, CBI lead economist, acknowledged the growth in retail sales and consumer demand driving economic recovery. However, he stressed the need for a shift in household spending towards consumer services, which is expected to occur later this year.
Paleja also addressed the ongoing operational challenges, pointing out that stock levels have hit a new record low and import penetration has decreased. He attributed these disruptions to continued labor shortages, particularly among younger workers who are waiting for their Covid-19 vaccines.
While the recent changes to self-isolation rules have eased some of the impact of the “pingdemic” on businesses, Paleja emphasized the importance of progress in the vaccine roll-out for younger cohorts. This is seen as crucial for boosting confidence as the country enters a new phase of the pandemic, characterized by living with the virus.
In conclusion, the CBI report highlights the growth in UK retail sales but raises concerns about the significant supply chain issues caused by Brexit and the Covid-19 pandemic. Despite the challenges, the industry shows signs of resilience and potential for growth. Retailers anticipate a slight improvement in the business situation in the coming months, but they will need to navigate the ongoing operational challenges and adapt to changes in consumer spending patterns.
Useful links:
1. BBC – Brexit and Covid: Supply chain issues hurting retailers
2. McKinsey – For retailers, there’s more than one way to build resilient supply chains
