Retail ends 2021 on a high note amid headwinds

UK retail weathered the challenging trade conditions of 2021 admirably, with sales up on both the previous year and compared to pre-pandemic levels.

For 2021 overall, total sales increased 9.9 per cent compared with 2020, according to the BRC-KPMG Retail Sales Monitor. Food growth was 3.1 per cent and the non-food growth was 15.6 per cent for the year, bouncing back from the turbulence of the Covid-19 pandemic last year. On a two-year basis, total retail sales grew 6.6 per cent for 2021 compared with 2019.

Despite the recent Omicron outbreak, retail sales held up through December, with sales increasing by 2.1 per cent on a total basis and 0.6 per cent on a like-for-like basis from December 2020, when they had increased 4.8 per cent like-for-like.

On a two-year basis, total retail sales grew 4.6 per cent during December.

“Following a strong November, retail sales continued to grow in December increasing by just over 2 per cent compared to 2020, although the spread of the Omicron variant and updated government guidelines slowed spending during the final weeks of the year,” Paul Martin, UK head of retail at KPMG.

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

Helen Dickinson, chief executive at British Retail Consortium, however, warned that the retailers face significant headwinds in 2022, as consumer spending is likely to be hold 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,” she added.

Commenting on the food and drink sector performance, Susan Barratt, chief executive of IGD, said the strong sales performance in December is particularly impressive considering the exceptionally strong sales recorded in December 2020.

“However, IGD’s Shopper Confidence Index shows that December was a month of two halves,” she said. “Overall confidence remained unchanged from November; but the index declined at the start of the month as further restrictions were announced to curb the rise of Omicron. However, as most people were able to celebrate with family and friends once again, shopper confidence increased significantly around the festive break.”

“Looking ahead and amid inflation reaching a 10-year high in December, the rising cost of living looks set to shape shopper sentiment in 2022 and our ShopperVista data shows that 86 per cent of shoppers expect food to get more expensive in the year ahead, the highest level since January 2016,” she added.