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May Brought Better News for the Retail Sector but Job Losses Expected in June

The month of May brought some mixed news for the UK’s retail sector, as consumer spending suffered a smaller contraction than in the previous month. However, it was still the second biggest fall since records began, behind only the previous month.

A Look at the Numbers

Retail sales dropped in value by 5.9% in May, when compared to the same month in 2019. This figure comes from the British Retail Consortium (BRC) and KPMG.

This was an improvement on the 19.1% drop that was seen in April, which is the highest ever seen since records began in 1995. Helen Dickinson is the chief executive of BRC. She called it “yet another month of struggle for retailers” in the UK.

Dickinson pointed out that it wasn’t only the businesses that remained closed due to the lockdown that had a tough month. She said that those that were open in May “suffered reduced footfall and huge costs implementing social distancing measures”.

In terms of online non-food sales, the BRC noted a 60% year on year increase in May. This was well over the annual average, which is 12.9%. As for online food sales, they rose by 9% when compared to last May, which is far more than the average annual increase of 2%.

It has also been noted that spending in supermarkets has held up well. A survey on credit card use in the UK revealed that overall spending was down 26.7% in May, following on from a 36.5% drop in April. However, supermarket spending rose by 24% in May.

Job Cuts Expected

One of the major issues facing the country in the next few weeks is the expected flood of job cuts, as the furlough scheme starts to wind down. With employers generally needing between 30 and 45 days to consult with staff on this matter, it is expected that some firms start this process in the next week or so.

About a million businesses are currently using the furlough scheme, at a cost to the country of some £14 billion each month. It is now getting to the stage that companies need to decide whether to start paying more of their employees’ wages or make them redundant. It should be remembered that many are relying on debt collection firms to get through this difficult period.

The 1st of July is the date when companies can take furloughed staff on a part-time basis. However, to do this they need to have been on furlough for at least 3 weeks, meaning that they need to be on this scheme by June 10th or they can’t be included.

A Look Ahead

The figures for May should show another improvement, although it is possibly still going to be one of the worst months on record. This is largely down to the fact that many businesses won’t reopen until the 15th of June, while others will remain closed until after this date.

One of the big unknown factors for the rest of the year is whether consumers will stick to online shopping. Some analysts believe that many people have now formed the habit of doing this and will continue to do. Others think that there will a rush of consumers heading to the High Streets of the nation once they finally re-open.