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Troubling Data Points to Slowdown in UK Apparel Spending

U.K. apparel retailers are not having an easy time undoing the damage coronavirus has inflicted.

U.K. retail sales for September rose 1.5 percent from August levels, representing its fifth consecutive month of growth and a 5.5 percent rise from February’s pre-pandemic level. Economists were expecting just a 0.4 percent uptick from August. However, apparel sales last month were still 12.7 percent lower than in February in volume terms, and sales at department stores were 0.9 percent lower, according to U.K.’s Office for National Statistics on Friday. Online sales for textiles and apparel were up 27.7 percent last month, but down 1.7 percent from the August report.

Meanwhile, there’s concern that consumer spending might dip between now and the end of the year after some some major cities have imposed new restrictions, given the resurgence in coronavirus Covid-19 infections. That’s a development that won’t be kind to the retail sector.

It hasn’t been easy for U.K. retailers. Earlier this month the British government said it plans to make changes to value-added taxes and duty-free shopping on Jan. 1, 2021. It’s a decision that has drawn criticism from some retailers still trying to lure back shoppers and now face the possibility that tourists will head instead to other European shopping destinations.

The only bit of good news apparel retailers have received was the exemption for the retail sector from shutdowns when Prime Minister Boris Johnson last week unveiled new restrictive measures under a three-tier approach. Right now, most retailers can avoid the temporary lockdowns that hit the nonessential group during the first wave of Covid-19, which has upended the retail sector and caused both bankruptcies and extensive job cuts. But that could be for a limited duration, especially if infection rates begin to dramatically spike up at multiple locations. Concerns of another spike and second wave are now having an impact on the consumer psyche.

Research firm GfK on Friday said that consumer confidence in the U.K. fell six points to minus 31 in the first half of October, representing the lowest reading since May. It’s also only in recent weeks that the country has started to see the beginnings of another rise in the Covid-19 infection rate. With confidence on the decline, the latest report is giving economists pause regarding possible layoffs and the direction of any economic recovery if sales continue to decline in the months ahead.

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On Thursday, U.K.’s chief financial minister Rishi Sunak unveiled a multi-billion-pound jobs support plan, one that critics complain should have been brought forth sooner. The plan includes grants for businesses impacted by local lockdowns and government assistance to the self-employed and workers receiving wage benefits. But the disclosure came at a time when cities such as Coventry and Slough are being moved up to Tier 2 restrictions, with Nottingham expected to move to Tier 3 shortly.

The Welsh government earlier this week mandated a “firebreak” lockdown through Nov. 9, shutting down all nonessential retail, leisure and hospitality businesses. And word came down Friday that Welsh supermarkets during the lockdown can make accessible only certain portions of their stores that sell “essential goods.” That has raised the question of what is defined as “essential,” although early indications are that they won’t be allowed to sell items such as apparel. While consumers can still purchase their apparel needs online, the lost sales from physical stores will be another hit to a retail sector that’s seen wide devastation from the global pandemic and is still trying to dig itself out.