Retail GDP fell by 2.2% in 2020, according to official figures out today. That’s the first annual decline in the industry’s output since 2011, when retail contracted by 0.2%, according to the ONS’s Coronavirus and the impact on output in the UK economy report, out today. The decline shows the extent to which the consumer shift to online shopping was not able to compensate retailers for the closure of non-essential shops during successive Covid-19 lockdowns.
Headline GDP fell by 9.9% in 2020 – the biggest annual fall on record and more than twice the fall seen in the financial crisis of 2009, according to the ONS.
The figures come as the British Retail Consortium this week estimates that retailers lost £22bn in potential sales during the course of 2020, and calls for government help in the March budget.
In December 2020 alone, retail output grew by 0.3%, and output was 2.7% ahead of the February 2020 levels for the industry, suggesting a recovery from the falls seen in earlier lockdowns. Across the UK economy, monthly GDP increased by 1.2% compared to the previous month – but was still 6.3% below the pre-pandemic level in February 2020.
And in the fourth quarter of 2020, GDP is estimated to have increased by 1% to a level that is 7.8% below the fourth quarter of 2019. This, says the ONS in its first quarterly estimate for the fourth quarter of 2020, was boosted by online retail activity at a time when many shops were closed. But, it says, “Although online sales lessened the impact of restrictions during November and December, output in the wholesale and retail trade and repair of motor vehicles sub-sector fell by 1.9% in quarter four 202, after a 30.9% increase in quarter three (July to September) 2020.”
The first estimate of annual – and December and fourth quarter – GDP comes in the week that the British Retail Consortium (BRC) calculates the three Covid-19 lockdowns have cost those retailers that had to shut their stores a collective £22bn in lost sales. It is calling on the government to support the industry in the upcoming budget.
The figure is based on the 24.7% fall in in-store retail that it has calculated for the year, and in the sharp decline in footfall, which fell by more than 40% in 2020. The BRC says tighter restrictions in the run-up to Christmas stopped retailers turning over cash that was needed for them to recover in 2021.
If retailers are to return to contributing the £17bn paid in business taxes in 2019, and the £46bn collected in VAT, it says, a strong retail sector is essential long-term. That, it says, is best achieved through helping retailers survive, by extending business rates relief, extending the moratorium on rents, and removing EU state aid limits from lockdown grants.
By doing so, non-essential retailers - from clothing and bookshops through to department stores and electricals retailers – will be able to get through the current lockdown and beyond without cutting jobs and closing shops.
Helen Dickinson, chief executive of the British Retail Consortium, says: “After 2020 proved to be the worst year on record, it is essential that the Chancellor uses the spring budget to support those businesses hardest hit by the pandemic. Vital support in the form of an extension to the business rates relief and moratorium on debt enforcement as well as removing state aid caps on Covid business grants would relieve struggling businesses of bills they cannot currently pay and allow them to trade their way to recovery.
“Tackling the challenge of rates, rents and grants should be the government’s immediate priority to ensuring the survival and revival of non-essential retailers and protecting the jobs of hundreds of thousands of retail workers across the country. The investment we provide to retailers now will be repaid many times over through more jobs and greater tax revenues in the future.”