UK retail sales fall for this first time since reopening

UK retail sales slipped last month to the weakest performance since shops reopened in April after lockdown restrictions were lifted, new figures from the Office for National Statistics (ONS) show.

Retail sales volumes dropped by 2.5% between June and July 2021 but remain 5.8% ahead of pre-pandemic levels, the data reveals.

ONS said this drop was partly driven by a decline in food store sales which were impacted by customers returning to hospitality venues and the end of the Euro 2020 football tournament.

The figures come significantly below the expectations of analysts, who had forecast an increase of 0.2% for the month.

Food store sales slipped by 1.5% for the month, compared with a 3.9% rise in the previous month.

Meanwhile, non-food stores, such as fashion chains, reported a 4.4% decline in volumes.

The slump was particularly driven by falls for second-hand goods stores and computer and telecoms equipment stores, the ONS said.

Elsewhere, fuel sales dropped by 2.9%, reflecting the first monthly fall since February.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “Following the Euro 2020-related boost in June, retail sales fell in July to their lowest level since shops reopened in April, but still remain well above pre-pandemic levels.

“Food sales fell back as further lifting of hospitality restrictions meant consumers had more opportunities to spend outside retail.

“Heavy rainfall at the start of July hit fuel sales, which dipped for the first time since February.”

Shoppers continued to spend more of their money online, with the proportion of retail sales taking place digitally rising to 27.9% in July from 27.1% in June.

Analysts' response

PwC consumer markets leader at PwC, Lisa Hooker

While the headline rate of growth slowed in July compared with June, retail sales were still comfortably ahead of both last year and pre-pandemic levels.

One positive for the high street is that online has stabilised at around 28% of retail sales, compared with over 36% earlier in the year, showing that shoppers are increasingly confident to venture out onto high streets and retail parks.

As we look ahead to the rest of the summer, the outlook continues to be rosy, with staycations encouraging retail spending at home rather than abroad, even if the full reopening of leisure might somewhat divert spending from shops to restaurants, pubs and other venues.

This should give the sector some respite as it recovers from the last tumultuous year, and with the prospect of a wind-down in government support such as business rates relief.

Barclays Head of Retail & Wholesale, Karen Johnson

July has been something of a mixed bag for UK retailers. Sales started strongly buoyed by sunshine but the wet weather following freedom day tempered sales growth for the month, as the industry also felt the impact of lower grocery sales as consumers ate out more in July (rather than dining at home).

Yet there are many reasons to be optimistic. Sales are up on 2020, with pent up demand post-lockdown still contributing to growth within the sector. Clothing and footwear have also continued to perform strongly, and a reinvigorated wedding season boosted formal-wear sales across the country.

Looking ahead, we expect to see back-to-school and back-to-work purchases push spend in the right direction – whilst a growing sense of stability should also lead to increased sales, particularly on big ticket items. Consumer confidence already seems strong across the sector, we now need this to continue.