Retail and wholesale output fell by 22.5% in the second quarter of 2020 – between April and June – compared to the same time last year, the latest GDP figures suggest. That’s a bigger fall than the 20.4% decline in UK output, as measured through gross domestic product (GDP), that was reported today. The fall in output comes primarily as a result of coronavirus lockdowns, but is also likely to be connected to a loss of consumer confidence.
Today’s figures come after a first quarter in which output in the retail and wholesale trade category was already down by 2.8% compared to the same period last year. Output in the category fell by 20% in the second quarter compared to the first quarter. That’s part of a 19.9% decline in the wider services category in the second quarter.
Today’s figures from the ONS, contained in the GDP monthly estimate for June, show UK gross domestic product (GDP) fell by an estimated – and record – 20.4% in the second quarter of 2020, according to the Office for National Statistics (ONS). That means the UK is officially in recession since GDP also fell by 2.2% in the first quarter of this year. The ONS says that UK GDP fell by a cumulative 22.1% in the first half of the year. That’s twice the fall seen in the US over the same period.
There was a hopeful signs that some level of recovery may be underway, since GDP in June alone rose by 8.7%, having grown by 2.4% in May. Nonetheless, output has not recovered from the record falls seen in March and April. In June it was still 17.2% down compared to February 2020, while the services sector was down by 17.6% over the same period, despite growth of 7.7% in June.
Focusing on retail, the ONS report cites data that suggests footfall in retail parks, shopping centres and high streets was on average 70% down in the second quarter of 2020 compared to the same time last year. Meanwhile the volume of retail sales was 9.5% down in the three months to June, according to the ONS’ Retail Sales report for June.
And the Bank of England Agents’ Summary of Business Conditions says, “spending on consumer service and non-food goods was significantly weaker than a year ago, though online sales of some products were strong”.
Stock held by UK companies fell by £2.5bn in the second quarter, led by a fall in the level of stocks held in the wholesale and retail trades and partly offset by increases in mining and quarrying stock levels, which rose as oil prices fell.
Commenting, Nimesh Shah, chief executive of tax and advisory firm Blick Rothenberg, said: “The UK is in deep recession, green shoots are appearing but is the worst yet to come?”
Shah said: “The critical time will be the last quarter of 2020, and there is a lot resting on the impact of the furlough scheme finally closing in October, the important festive trading period for businesses and a realistic chance of successful vaccine becoming available. Many businesses are limping through to Christmas, but it will be a rollercoaster between now and the New Year with so many unpredictable elements in play.
“The Chancellor needs to look at ways to support businesses, to naturally re-deploy the workforce and encourage employment. Tax exemptions or holidays for National Insurance is one idea, and access to funding on sensible and realistic terms is vital.”
And he said: “There have been a number of recent reports of job cuts, in the retail and leisure and hospitality sectors in particular, and it’s important that the Government does everything it can to limit unemployment. There have been calls to extend to the furlough scheme beyond October, and possibly only for certain sectors, but the Chancellor has been clear that the scheme must end (after two extensions) and there is an ever-increasing cost to the Treasury. Today’s figures naturally present a worrying situation, despite the economic recovery being well underway; the Chancellor must not lose of sight of ensuring the right support for businesses to encourage employment beyond the current schemes, otherwise it could be a very bleak winter ahead.”