UK’s May retail sales drop 1.4% due to ease in lockdown curbs

British retail sales fell last month on easing lockdown curbs, as people dined at restaurants instead of buying food at supermarkets, data showed on Friday.

Sales by volume declined 1.4 per cent in May after a 9.2-per cent bounce in April, the Office for National Statistics said.

Food stores were the hardest hit, with sales sinking 5.7 per cent as Britons took advantage of reopening hospitality.

Under the phased reopening of Britain’s battered economy, bars and restaurants restarted outdoor dining in April and indoor services in May.

“Instead of eating every meal at home as we all did during lockdowns, we were able to dine outside at cafes or restaurants,” said Capital Economics analyst Paul Dales.

“Spending just shifted from the shops to social activities,” he said, but warned, however, that “soft retail sales data could mean May was not as strong for the economy as we had thought”.

Overall UK retail sales in April and May were nevertheless 9.1 per cent higher than the pre-pandemic level in February 2020.

The UK also reopened non-essential retail in April, allowing the broader British economy to recover further from pandemic fallout on the rapid vaccines rollout.

The economy is now expected to fully reopen on July 19, after the government this week delayed the date by four weeks due to surging Delta infections.

Britain’s business lobby predicted Friday that the economy is on course to reach its pre-Covid level by the end of 2021.

The Confederation of British Industry, the nation’s biggest employers’ organisation, now expects the economy to surge 8.2 per cent this year and 6.1 per cent in 2022.

The Covid-ravaged economy had collapsed by almost ten per cent last year in Britain’s biggest slump in three centuries -- and the worst performance among the G7.

Stubborn Brexit worries also fester after Britain formally exited the EU single market at the start of 2021.

Industry data showed Friday that UK food and drink exports to the bloc almost halved in the first quarter as a result of both Brexit and pandemic fallout.

The Food and Drink Federation (FDF) said EU sales slumped 47 per cent from the same period a year earlier.

Exports to the EU fell by £2.0 billion ($2.8 billion, 2.3 billion euros) compared with the first quarter of 2019, before the pandemic struck.

The industry body blamed “the ongoing impacts of Covid-19 and changes in the UK’s trading relationships” after Brexit. Non-EU sales accounted for 55 per cent of all UK food and drink exports in the first quarter, it added.

“The loss of £2 billion of exports to the EU is a disaster for our industry,” said Dominic Goudie, head of international trade at the federation.

The news “is a very clear indication of the scale of losses that UK manufacturers face in the longer-term due to new trade barriers with the EU”, he added.

Tesco’s sales slow: Tesco’s sales growth has slowed sharply since the easing of the latest coronavirus lockdown as people start to visit pubs and restaurants again, Britain’s biggest retailer said on Friday.

UK like-for-like sales, excluding fuel and VAT sales tax, rose 0.5% in the 13 weeks to May 29, the group’s fiscal first quarter - ahead of analysts’ average forecast for a fall of 1.0%, but down from growth of 8.8% in the previous quarter.

Against the same quarter in 2019, before the pandemic impacted trading, UK like-for-like sales were up 9.3%.

“We continued to benefit from more people eating at home, although this started to slow down through the quarter as hospitality reopened,” CEO Ken Murphy told reporters.

Tesco shares were down 2.6% at 0932 GMT.

Murphy said shopping habits were changing as pandemic restrictions ease, with customers visiting stores more often. Transactions were also up year-on-year as the lockdown trend of doing one big weekly shop began to reverse. There were changes in what people were buying too.

General merchandise and clothing like-for-like sales were up 10.3% and 52.1% year-on-year respectively, as people got ready to socialise again.

Murphy said that while sales last year were focused on core grocery products such as pasta, this year customers were treating themselves to items such as Prosecco more.

Separately on Friday official data showed British retail sales fell unexpectedly last month as the relaxing of restrictions encouraged spending in restaurants rather than shops.

Tesco, which has a 27% share of Britain’s grocery market, said first quarter online sales were up 22.2% year-on-year and up 81.6% on a two year basis.

Total group sales were 13.4 billion pounds ($18.6 billion) up 1% like-for-like and year-on-year.

Tesco kept its guidance for retail operating profit on a continuing operations basis for the 2021-22 fiscal year to recover to be similar to the 2019-20 outcome.