Britain’s retail sales rebound thanks to early Christmas shopping

Public sector net borrowing dipped slightly in October as economy continued recovery

British retail sales rose for the first time in six months in October thanks to early Christmas shopping, official data showed on Friday.

Shoppers seeking new clothes for the festive period pushed retail sales volumes up 0.8 per cent in October compared with the previous month, according to the Office for National Statistics.

An increase in transactions at second-hand shops also provided an uplift, particularly spending at auction houses and charity shops.

“After five months of no growth, retail sales picked up in October. Although sales overall are above pre-pandemic levels, it remains a mixed picture,” said ONS chief economist Grant Fitzner.

The monthly rise included a 4.2 per cent jump in non-food sales as department stores and toy shop sales recorded a boost with clothing retailers reaching their highest level since the start of the pandemic with a rise of 6.2 per cent.

Sales in clothing shops were only 0.5 per cent below pre-pandemic levels with “some retailers suggesting that early Christmas shopping helped to bolster trade”, Mr Fitzner said.

Helen Dickinson, chief executive of the British Retail Consortium, said footfall growth on UK streets is the highest among major EU economies as retailers put in “a gargantuan effort to ensure that essential food and gifts are ready for Christmas”.

However, retailers were still dogged by ongoing challenges including supply chain problems, she said.

“Labour shortages throughout the supply chains – from farms to distribution – are pushing up costs and creating some gaps on the shelves." Ms Dickinson said.

“Nonetheless, retailers are prioritising Christmas essentials, and many have laid out their festive offerings a little earlier to ensure everyone has time to buy treats and decorations before the big day.”

While online sales are well above pre-pandemic levels as retailers ramp up their delivery and click-and-collect services, the proportion of retail spending made digitally fell to 27.3 per cent in October from 28.1 per cent in September.

This was the lowest level since March 2020 when the first lockdown started, although it is still substantially higher than the 19.7 per cent it started from when the pandemic struck

Meanwhile, fuel sales fell 6.4 per cent in October, returning to more normal levels after panic buying during a supply crisis in September.

Lisa Hooker, consumer markets leader at PwC, said retailers will be breathing a sigh of relief as retail sales inched up in October on almost every measure.

“The sector as a whole is almost 10 per cent ahead of where it was before the pandemic, and even the hardest hit categories such as fashion have almost recovered to pre-pandemic levels,” she said.

The question for retailers is whether the momentum will continue into December and beyond, Ms Hooker said, after inflation hit a decade high of 4.2 per cent in October.

“Rising inflation, particularly for non-discretionary spending, and the prospect of interest rate and tax rises will undoubtedly produce a drag on the sector in the new year," she said,

Ms Dickinson said retailers are hopeful that demand will continue right through the golden quarter, but that “challenges remain, with higher prices looming and many households facing rising energy bills”.

Separately, British public sector net borrowing dipped slightly in October as the economy continued its recovery and the furlough scheme came to an end.

Borrowing, the difference between the government’s spending and tax income, stood at £18.8 billion ($25.25 billion) in October, £200 million less than a year earlier.

Despite the drop, the figures were still the second highest for the month of October since records began.

The data shows that borrowing so far this financial year is £127.3bn – £103.4bn less than the same period a year ago, with public sector net debt now standing at £2.28 trillion at the end of October.

This is about 95.1 per cent of gross domestic product – maintaining levels not seen since the early 1960s.

Chancellor of the Exchequer Rishi Sunak said the support that the government provided during the pandemic “protected millions of jobs and businesses, but also left us with much higher public debt”.