UK retail sees festive cheer in December but faces "significant head winds" in 2022

UK retail sales held up in December 2021 despite the recent outbreak of the Omicron COVID-19 variant, with many people choosing to shop online and loungewear again seeing increased demand as consumers pre-empted the possibility of future restrictions.

Covering the five weeks from 28 November 2021 to 1 January 2022, on a total basis sales increased by 2.1% in December, against a growth of 1.8% in December 2020. That’s above the three-month average growth of 2.8% and the 12-month average growth of 9.9%.

On a two-year basis, total retail sales grew 4.6% during December compared with the same month in 2019, according to the latest data from the BRC-KPMG Retail Sales Monitor.

UK retail sales also increased 0.6% on a like-for-like basis from December 2020, when they had increased 4.8%.

Over the three-months to December, non-food retail sales increased 4.8% on a total basis and increased by 1.4% on a like-for-like basis. For the single month of December, non-food was in growth year-on-year.

Over 2021, online non-food sales increased by 14.3% compared with 2020. On a two-year comparison, online non-food sales increased by 24.4% in 2021 compared with 2019.

Over the three months to December, in-store sales of non-food increased 36% on a total basis and 26.8% on a like-for-like basis. For 2021 overall, in-store sales of non-food items increased 38.4%, compared with 2020.

However, on a two-year comparison, over the three months to December, in-store sales of non-food items declined -7.7% compared to the three months to December 2019.

Online non-food sales decreased by -13.9% during December, compared to December 2020 when the UK was in lockdown for large parts of the month, and shoppers had no other way of making purchases. However, on a two-year comparison, online non-food sales increased by 24.4% in December compared to December 2019. That’s above the three-month average increase of 23.3%.

Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), said: “Despite the recent Omicron outbreak, retail sales held up through December. Many people chose to shop online rather than travel to nearby high streets and shopping centres. Loungewear was back in fashion, as many pre-empted the possibility of future restrictions. Meanwhile, the return of work-from-home advice and reduction in Christmas social events, caused formalwear sales to slow. In the face of rising case numbers and supply chain issues, people in retail pulled out all the stops to ensure everyone got what they wanted this Christmas.

“Retailers did well to weather the challenging trade conditions, with retail sales for 2021 up on both the previous year and compared to pre-pandemic levels. Continuing a trend throughout the pandemic towards online shopping, 2021 saw a double digit rise in non-food online sales, a testament to retailers’ huge investments in their online platforms.

However, retail faces significant head winds in 2022, as consumer spending is held back by rising inflation, increasing energy bills, and April's National Insurance hike. It will take continued agility and resilience if they are to battle the storm ahead, while also tackling issues from labour shortages to rising transport and logistics costs.”

Paul Martin, UK Head of Retail at KPMG, added: “Following a strong November, retail sales continued to grow in December increasing by just over 2% compared to 2020, although the spread of the Omicron variant and updated Government guidelines slowed spending during the final weeks of the year.

“Apparel and jewellery continued to dominate Christmas gift buying at the tills, while spending on food and drink was solid, although it slowed to just over 1%.

“Consumers continued to head to the high street for their festive gifts, determined to secure the presents they wanted and not leaving online deliveries arriving on time to chance. Footwear was the only online category to see mild growth as overall online sales continued to decline, falling by over -8% in December albeit against strong comparators in 2020.

“As we head into 2022, retailers will be keeping close to Government COVID-19 updates and hoping consumer confidence holds up in order to offset the rising cost challenges they are likely to experience for the foreseeable future.”