According to the most recent Distributive Trades Survey released by the Confederation of British Industry (CBI), UK retail sales in January were disappointingly weak. The survey, which gathered responses from 101 firms, including 42 retailers, revealed a net balance of -23% for January, a significant drop from -2% in December. This decline in sales marks the first dip since September and highlights a challenging start to the year for the retail sector.
The report also predicts continued weakness in February, with a net balance of -17% anticipated for the month. These lower sales figures can be attributed to the tightened Covid restrictions that were in place during the survey period, which coincided with the spread of the Omicron variant.
Interestingly, online sales also saw a decline in January, with a net balance of -2%, compared to +3% the previous month. Looking ahead to February, online sales are expected to remain stagnant.
Despite the overall weakness in sales, a net balance of 28% of retailers reported above-average growth in January. However, it is important to note that this comparison is made to January 2020, when non-essential retail stores were forced to close due to Covid restrictions. Therefore, the increase in sales is not particularly remarkable.
Stock volumes in relation to expected sales were deemed too low across the distribution sector, a shift from the previous month when stock levels were considered satisfactory. In all three main sectors, relative stock levels were viewed as insufficient. This trend is expected to persist into February and can be attributed to the global supply chain issues that have plagued retailers.
Ben Jones, lead economist at the CBI, expressed little surprise at the drop in retail sales below seasonal norms in January. He attributed the decline to the impact of the Omicron variant, the reintroduction of restrictions in late 2021, and increased consumer caution. Jones also highlighted the challenges that lie ahead for the retail sector, including rising energy and transportation costs that are eating into households’ spending power and mounting costs for retailers themselves.
As the UK continues to navigate the evolving Covid landscape, retailers must remain vigilant about the future. The combination of ongoing pandemic-related challenges and inflationary pressures presents a complex and uncertain outlook for the sector. To succeed in this changing environment, retailers will need to be agile and adaptable.
