By David Milliken and Andy Bruce
LONDON (Reuters) – British retailers struggled to recover in December from a partial coronavirus lockdown the previous month, marking a weak end to their worst year on record, while public debt has climbed to its highest since 1962, official data showed on Friday.
The figures suggest Britain’s economy had little momentum going into 2021. The government tightened COVID-19 lockdown rules on Jan. 5 to tackle a surge in cases that has kept Britain’s death toll the highest in Europe.
A closely watched business survey released on Monday showed the measures contributed to the sharpest fall in economic activity since May, in addition to headwinds from new paperwork for exports to the European Union.
Finance minister Rishi Sunak faces pressure from some in his Conservative Party to show spending is under control when he presents a new budget on March 3, after what is on track to be the heaviest annual borrowing since World War Two.
Sunak has again promised to put the public finances on “a more sustainable footing” once the economy begins to recover, after Friday’s data showed public borrowing since the start of the financial year in April reached a record 271 billion pounds ($370 billion).
Britain’s Office for National Statistics said retail sales volumes rose 0.3% in December, far less than economists’ forecasts in a Reuters poll for a 1.2% increase, leaving them just 2.9% higher than a year earlier.
For 2020 as a whole, retail sales were down 1.9%, the biggest calendar-year fall since these records began in 1996. Clothing sales slumped by more than a quarter and spending on fuel dropped by more than a fifth.
Sterling fell slightly against the dollar and the euro following the weaker-than-expected retail numbers.
“With no end in sight for retailers closed in lockdown, many will struggle to survive,” said Helen Dickinson, chief executive of the British Retail Consortium trade body, calling for more government help for the sector.
Department store Debenhams is among well known names to have collapsed. Administrators said last week its flagship Oxford Street store in central London would close permanently due to the latest COVID restrictions.
Public sector borrowing for the month of December came in at 34.1 billion pounds, just above Reuters poll forecasts. Total public sector debt had reached 2.132 trillion pounds, equivalent to 99.4% of GDP, the most since 1962.
Bank of England chief economist Andy Haldane said on Tuesday government borrowing on this scale was essential to stabilise the economy. He said he did not see a looming debt crisis, predicting interest rates would remain very low for a long time.
“This level of spending may be eye-wateringly large, but it is absolutely necessary,” said Charlie McCurdy, a researcher at the Resolution Foundation think tank.
December offered a partial respite for Britain’s economy, which has seen sharper falls in its official measure of output than any other advanced country, as well as Europe’s highest official death toll from COVID-19.
In November, the economy shrank 2.6%, due to a four-week lockdown in England and similar measures in other parts of Britain, although some restrictions had remained in place for retailers in December.
This month the government went further and shut schools as well as all non-essential retailers, which most economists think will lead to the economy contracting in the first quarter.
Flash purchasing managers index (PMI) data on Monday showed manufacturing growth slowed in early January, and services firms suffered a sharp fall in activity and reduced their workforce.
“The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures,” survey publishers IHS Markit said.
Experimental data from the ONS on Thursday showed consumer spending in early January was 35% lower than before the pandemic began in February, although the figures were not seasonally adjusted to reflect the typical post-Christmas lull.
Retail sales have performed better than other areas of consumer spending, with shoppers switching to online stores, where spending surged by 46.1% in 2020.
Excluding the slump in fuel sales, retail sales grew in 2020, albeit by the lowest level since 2011, reflecting extra spending on groceries and household goods by people stuck at home.
($1 = 0.7310 pounds)
(Reporting by David Milliken and Andy Bruce, Editing by Guy Faulconbridge, Edmund Blair and Emelia Sithole-Matarise)
UK shopper numbers rise for sixth straight week as Britons tire of lockdown
LONDON (Reuters) – The number of people heading out to shops across Britain climbed 11% last week from a week earlier, in a sixth week of gains despite a national lockdown, market researcher Springboard said on Monday.
Shopper numbers, or footfall, in the week to Feb. 27 climbed 15.9% in high streets, 6% in shopping centres and 5.9% in retail parks, it said.
Diane Wehrle, Springboard’s insights director, said the data suggested evidence of “lockdown fatigue” amongst consumers.
“Perhaps prompted by the announcement of the government’s roadmap to reopening at the beginning of the week, but then supported by drier warmer weather in the second half of the week, footfall in UK retail destinations rose once again last week from the week before,” she said.
“Not only was this the sixth consecutive week that footfall has increased, but its magnitude was greater than in any previous week and nearly twice that in the week before.”
The gap in footfall in retail destinations from 2020 narrowed to down 56.5%, from down 62.1% a week earlier.
England entered a third national lockdown on Jan. 4 to contain a surge in COVID-19 cases that threatened to overwhelm parts of the health system.
The rules in England mean schools are closed to most pupils, people should work from home if possible, and all hospitality and non-essential shops are closed. Scotland, Wales and Northern Ireland imposed similar measures.
Essential shops allowed to stay open include food outlets and home improvement retailers.
Last week, Prime Minister Boris Johnson announced a roadmap out of lockdown that will see non-essential shops in England open again on April 12.
(Reporting by James Davey; Editing by Alistair Smout and Bernadette Baum)
The cost of Brexit to an eCommerce business: How can the effects be minimised?
After four years of uncertainty for businesses, the UK has finally left the EU, bringing many changes to rules and legislations into force. Almost every individual component of ecommerce businesses will be affected, with everything from shipping costs to trading fees subject to changes.
Despite a long warning period, Government data has revealed that almost two thirds (61%) of businesses had made no preparations to leave the EU by June 2020, and whilst the Covid-19 pandemic had certainly added further economic stress onto businesses during this time, the delaying of preparations has made the process even more difficult. Here, warehousing and logistics platform Trident Worldwide discuss the effects of Brexit on ecommerce businesses and how they can be minimised.
Consider your ecommerce business’ shipping and sourcing locations
For online businesses that are trading outside of the UK, Brexit will now change every element within the business and will determine the complexity of each step of trading, from sourcing materials to postage.
It is vital to consider the location of where materials are being sourced, manufactured, stored, and even where customer bases are situated to keep additional costs at a minimum. For new customs regulations, all ecommerce businesses with need to apply for a UK and EU EORI number to be able to sell into the UK. Only a few weeks into the new legislations and the effects of this change are already showing, and with the UK currently positioned as the world’s third largest online retail market and the top market in Europe, this issue is only going to be magnified further.
Leila Aaboud from international law firm Berkeley Rowe explains how ecommerce businesses can overcome changes due to Brexit: “After years of positive growth, it is unfortunate that European e-commerce businesses are facing numerous challenges at the start of 2021 such as delivery speed and technical issues due to Brexit. Businesses actively involved in the international supply chain should now consider applying for an Authorised Economic Operator (AEO) certification to counter the trade delays inflicted by Brexit. Entering the AEO scheme is highly beneficial to businesses in that it will enable them to trade efficiently through simplified customs procedures and fast-tracked shipments. “Additionally, businesses with an AEO certification will gain a ‘trusted trader’ status which is an increasing demand amongst international clients.
“In line with government guidelines and to avoid increased costs and delays when trading across international borders, businesses need to apply for an Economic Operators Registration and Identification (EORI) number. Previously, EORI numbers were only required when exporting goods to non-EU countries however, since January 1st, businesses exporting goods from Great Britain to the EU will need an EORI number starting with ‘GB’. This number is used to uniquely identify the exporter in customs procedures and documentation.
“To avoid any potential losses, e-commerce businesses should prioritise being cost-effective throughout Brexit and should continue lining up their costs during the introduction of new Brexit tariffs.”
Understand new tax regulations and their effects
For goods shipped into the U.K., several changes have taken place that affect VAT, liability, and tax obligations to name just a few key components. To stay profitable, it is key for online retailers to pick the countries that they choose to work with carefully and consider each additional cost throughout the logistics process.
Arjun Thaker, CEO at Trident Worldwide says, “The Brexit deal agreed on Christmas Eve explains that under the new terms, anyone sending parcels from the EU to the UK needs to fill in forms including proof of origin and the reason for sending the package. Retailers selling to the UK are also now required to pay customs duties and fill out declaration forms, as well as register for VAT in the UK.”
Review your supply chain
The three main issues for ecommerce businesses caused by Brexit are delivery times, new tariffs on goods and the drop in value of the pound sterling, all of which affect the supply chain cost and efficiency.
Review your business logistics and supply chain and consider more efficient ways of sourcing and shipping goods that may minimise delays and import duties on goods coming from the EU. If possible, consider bulk-sourcing goods locally; this may cost more initially, but you may save money on importation tax in the long run, making the logistics of your business more seamless.
Arjun Thaker, CEO at Trident Worldwide, said: “Considering the logistics of your business throughout Brexit can be confusing for many businesses as new rules and regulations come into play. It is key for ecommerce retailers to plan, manage and market with effective end-to-end logistics handled professionally to help make the transition easier.”
A July 2020 survey conducted by delivery management company Whistl outlined that consumers in Europe feel strongly that Brexit will lead to less choice of UK goods to purchase online. However, UK respondents were more evenly split, with 23% believing that there will be more choice post-Brexit, with an equal 23% believing there would be less. This clearly highlights the uncertainty surrounding ecommerce retail across Europe in a post-Brexit world, yet some retailers are already altering prices to align with this newly acquired outlook.
Amazon UK has taken the decision to add a 20% price increase to items sold by non-UK sellers, with overseas sellers now finding themselves in an increasingly difficult position in which they are unable to compete with domestic sellers. Sellers on Amazon UK are also seeing increased importing fee deposits, with a huge 60-day waiting period for refunds, effecting the trust between ecommerce businesses, and selling platforms.
Arjun at Trident Worldwide explains: “According to government calculations published last summer, it was suggested the UK businesses would have to submit 215 more customs forms a year after Brexit, from EORI numbers for every order, to Rules of Origin and Customs Declaration, as the requirements for information are huge.
The present drama’s and delays are thought to be caused by extra paperwork and additional customs and border checks. We can already see the parcel carriers and logistics providers struggling and the retailers adding additional pricing for international deliveries, so far, several companies have been hit by the disruption almost three weeks into the new arrangements.
So, who is going to pay these additional costs? Ultimately, it is us the consumer who will have to pay the additional costs added to the price of delivery and the price of goods.”
The ecommerce industry has undoubtedly been changed, with many businesses having to adapt quickly to the new regulations brought into place. By remaining reactive and critical of each aspect of the business, online retailers are more likely to thrive and grow.
UK factory output grows at slowest since May, consumer lending slides
By David Milliken and William Schomberg
LONDON (Reuters) – British manufacturers reported their slowest output growth since May last month, hit by Brexit and COVID-19-related delays, and consumers cut back heavily on borrowing in January as they returned to lockdown.
Britain’s economy is set to shrink sharply in early 2021 though manufacturers are upbeat about prospects later in the year, when they expect lockdown restrictions to end.
The speed of the recovery for households will also be critical. Bank of England data showed consumer borrowing in January suffered its biggest annual decline since records began in 1994, sliding 8.9%.
Britain entered a third national lockdown in January, closing schools, non-essential shops, restaurants and most other businesses open to the public, though people can still travel to work if needed.
Finance minister Rishi Sunak has announced an extra 5 billion pounds ($7.0 billion) of support for services firms and plans to offer more aid in an annual budget on Wednesday.
“All eyes are now on Wednesday’s budget to see if the chancellor has any surprises up his sleeve that will give the (manufacturing) industry’s businesses a boost for the latter part of the year,” said Simon Jonsson, a partner at accountants KPMG.
The BoE expects the economy to shrink 4% in the first three months of 2021 – a sharper decline than during any quarter of the 2008-09 financial crisis though much less than the 20% drop last spring.
The weak consumer borrowing suggests a slump in spending on non-essentials. Official retail sales data showed overall purchases fell by 8.2% in January.
Some of the weak borrowing also reflects repayment of loans by better-off households.
The BoE expects pent-up household savings to be unleashed when lockdowns end, but the scale of any bounce is uncertain.
Manufacturing has fared better than consumer-facing sectors. Nonetheless, February’s IHS Markit/CIPS Purchasing Managers’ Index (PMI)’s key output component showed growth slipped further after a sharp drop in January.
“Continued COVID-19 related disruption, now exacerbated by manufacturers’ cautious navigation of the new UK-EU trading arrangement, has created a scenario in which logistical and supply-side challenges are limiting the rate of economic recovery,” said James Brougham, an economist at industry body Make UK.
The broader manufacturing PMI touched a two-month high of 55.1, slightly higher than suggested by a preliminary reading.
However, much of the rise reflects longer delivery times and higher costs – which historically were linked with increased activity but more recently have represented a constraint.
Confidence for the year ahead was its highest in more than six years. This is despite new post-Brexit customs rules which took effect in January and increased the cost and complexity of trade with the European Union, especially for smaller firms.
Materials costs rose at the fastest rate in four years and delivery times lengthened sharply too.
($1 = 0.7164 pounds)
(Reporting by David Milliken and William Schomberg; Editing by Hugh Lawson)
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