According to the latest monthly Distributive Trades Survey conducted by the Confederation of British Industry (CBI), the arrival of the Omicron variant of COVID-19 has had a devastating impact on the UK retail industry. In December, retail sales growth slowed significantly, with a balance of only +8% compared to +39% in the previous month. This decline is expected to continue in January, with retailers anticipating a growth rate of only 5%.
The survey included responses from 109 companies, including 41 retailers, and revealed an overall deterioration in reported and expected sales growth across the distribution sector. Following the announcement of Plan B Covid measures on 8 December, sales were considered to be below average for this time of year, with a balance of -2% compared to +35% in the previous month. Looking ahead, sales are projected to be even poorer next month, with a balance of -11%.
Internet sales also remained stagnant in the year leading up to December, with a small growth of +3% compared to a decline of -14% in the previous month. However, expectations for January have taken a sharp decline, with a projected decline of 23%. It is important to note that these projections were made before the threat of the Omicron variant had fully emerged. Before the announcement of Plan B, over half of the responding firms reported an increase in sales compared to the previous year. However, this figure dropped to only one third for firms that responded after 8 December.
While orders placed with suppliers experienced a faster pace of growth in December compared to November, a slower rate of growth is expected for the coming month. Stock levels in relation to expected sales were reported as “more than adequate” for the first time since February of this year, and they are expected to remain broadly adequate in January 2022. This positive balance of +22% indicates that retailers are building up inventories to mitigate ongoing pressures. However, it is important to note that some retailers continue to struggle to do so.
CBI Lead Economist Ben Jones expressed concerns about the impact of Omicron and the potential disruption it could cause in the New Year. He emphasized the need for meaningful dialogue between business, government, and unions to assess the impact of restrictions and determine the future need for support.
In conclusion, the Omicron variant has dealt a heavy blow to the UK retail industry, resulting in a significant slowdown in retail sales growth. As businesses prepare for a similarly challenging performance in January, retailers are working to build up inventories to mitigate ongoing pressures. However, concerns remain about potential disruptions to supply chains due to increasing sickness and staff absences. It is crucial for the government to engage in constructive dialogue with businesses and unions to assess the impact of restrictions and provide necessary support. Only through collaboration can society confidently navigate the challenges posed by the virus.
Useful links:
1. CBI: Q4 2021 Distributive Trades Survey
2. BBC: ‘Covid: Omicron to deal UK shops ‘significant blow’ in December’
