British retail sales growth falls sharply on Omicron concerns

British retail sales growth fell sharply in the first half of December as concerns about the Omicron variant of coronavirus kept shoppers at home, according to a survey which could add to pressure on the government to provide more emergency support.

The Confederation of British Industry’s (CBI) gauge of sales volumes - which asks retailers how sales compare with a year ago - slumped to +8 in December from +39 in November, its lowest reading since non-essential shops were in lockdown in March.

“Our December survey confirms what we’ve been hearing anecdotally about Omicron’s chilling impact on activity on the high street, with retail sales growth slowing and expectations for the coming month sharply downgraded,” CBI economist Ben Jones said.

Cases of COVID-19 have risen by more than 60 per cent in Britain over the past week, with around 90,000 people a day testing positive recently.

Prime Minister Boris Johnson has so far refrained from further legal restrictions to slow the spread of the new variant, but has not ruled out taking more action.

Business groups want finance minister Rishi Sunak to provide more help. Sunak was due to comment soon about his discussions with representatives of the hospitality industry who are demanding more government support, a minister said.

“It’s crucial that the government takes steps to help society live confidently with the virus, including meaningful dialogue between business, government and unions to assess the impact of restrictions and the need for future support,” the CBI’s Jones said.

The increase in cases has been especially sharp in London. Shopper numbers fell 8.5 per cent in central London last weekend and by less in other city centres, according to figures from market research company Springboard published on Monday, while the hospitality industry says takings were down by 40 per cent.

The CBI survey showed retailers expected sales to be roughly normal for the time of year in December - having been well above in November - and to be below normal in January.

Retailers had plenty of stock for now, but feared staff absences could lead to renewed disruption of supply chains next month, the CBI added.

Samuel Tombs, economist at Pantheon Macroeconomics, said the slowdown could also reflect how some households did Christmas shopping earlier than normal this year.

“We think that retail sales should be relatively immune to the impact of the Omicron variant, particularly if consumers shift spending away from services venues,” he said.

The survey was based on responses from 41 retail chains between Nov. 24 and Dec. 14.

Meanwhile a rebound in global risk appetite pushed the British pound up against the dollar and euro on Tuesday, after Prime Minister Boris Johnson cautioned that further lockdown measures may be needed.

A combination of fears about the rapid spread of the Omicron coronavirus variant, possible lockdowns in Europe, as well as a blow to US President Joe Biden’s fiscal spending plans caused a “risk-off” move in currency markets on Monday, with the pound dropping to as low as $1.3175.

As the move reversed on Tuesday, however, the pound recovered in line with other risk-sensitive currencies. It was up 0.3 per cent on the day at 1215 GMT, at $1.3248, having erased its gains from when it jumped to $1.33755 following the Bank of England raising rates last week.

Versus the euro, it was up around 0.2 per cent at 85.21 pence per euro.

Johnson said on Monday that he would take “further action” to limit the spread of the Omicron variant if needed, describing the situation as “extremely difficult”.

British media said ministers had pushed back against the prospect of new restrictions before Christmas.

“The fast spread of the Omicron variant in the UK may keep some pressure on GBP around Christmas, in particular as the government may opt to impose some new restrictions,” wrote ING FX strategists in a client note.

ING said that investors likely still have short positions on the pound, which could help limit its losses, but “risks still appear moderately skewed to the downside”.

Data showed British public borrowing nearly halved in the first eight months of the 2021/22 financial year compared with a year earlier when finance minister Rishi Sunak was deep in his emergency pandemic spending programme, official statistics showed.

“Although the economy has got better at coping with restrictions with each new wave, we still suspect it would prompt a deterioration in the public finances via lower tax revenues and the potential reintroduction of government support schemes,” said Bethany Beckett, UK economist at Capital Economics in a note to clients.