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UK’s Covid-Fighting Plan B Will Curb Retail Traffic: Week Ahead

The pandemic is hitting fashion retailers again for the second year in a row.

On Wednesday, U.K. prime minister Boris Johnson unveiled a Plan B to deal with the emergence the Omicron Covid-19 variant. “It’s become increasingly clear that Omicron is growing much faster than the previous Delta variant,” Johnson said during a briefing at Downing Street.

The new restrictions, most of which begin Friday, don’t yet rise to the level of a lockdown, but are onerous enough to curtail footfall at fashion retailers—particularly as employees are asked to work from home again when possible. And depending on how Omicron progresses, another lockdown can’t be ruled out. Last year, the rise of the “frustrating and alarming” Delta variant over the holidays forced the U.K. into a lockdown to start 2021. During Wednesday’s news briefing, Johnson said the new variant  was “growing much faster” than Delta, noting that early data suggested that cases could double every two-and-a-half to three days.

Plan B, along with renewed “work from home” mandates, arrives during what is likely retail’s most important time of the year.

In fact, Springboard predicts foot traffic will drop to 50 percent below 2019’s pre-pandemic levels in Central London and to fall 30 percent below in cities outside of the capital. In contrast, retail parks, where foot traffic is down 4 percent from 2019 levels, could see a slight strengthening to down 2 percent from 2019 levels as it picks up some activity from the drop in city centers. In outer London, the decline in foot traffic from the current level of 10 percent below 2019 traffic patterns is projected to rise to down 15 percent, while market towns could see declines rise to 19 percent from 2019 levels from the current decrease of 16 percent, the U.K. footfall data firm Shopping centers are also expected to see a drop in foot traffic to down 28 percent from the current decline of 22 percent from 2019 levels.

“From our knowledge of previous periods of Covid restrictions we know that enforced home working and increased nervousness around Covid means a proportion of this footfall will be diverted elsewhere, predominantly to smaller high streets that are more local to shoppers’ homes and are less congested, and to retail parks, many of which have a wide range of high street retail stores that are large and spacious, combined with open air parking that is free of charge,” said Diane Wehrle, Springboard’s insights director.

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Wehrle said the decline in footfall from Plan B guidelines represents “another hammer blow to an industry that is still trying to recover from a huge loss of trade in 2020.”

“Whilst many retailers benefited from a huge uplift in their online sales last year, for the vast majority this was simply not enough to make up for the loss of store sales; after all, in normal trading conditions pre Covid in 2019, 80 percent of retail sales were store based,” she added.

However, media coverage of ongoing supply chain disruption likely “encouraged [shoppers] to purchase their Christmas gifts earlier this year,” Wehrle added, potentially mitigating the restrictions’ traffic impact.

Detailing a business update Friday, Associated British Foods chairman Michael McLintock said Primark has weathered the year’s disruption by focusing on “in demand” products.

“Primark trading year to date has been ahead of expectations with improved like-for-like sales compared to the fourth quarter of our last financial year,” he said. “We are managing disruption in our supply chain by prioritising products most in demand with the support of our logistics providers for whom we are a very important customer. We have stock cover on the vast majority of lines for the important Christmas trading period.”

Rising Covid-19 cases and the “public health measures taken to date in our markets are mainly restrictions in trading hours in the Netherlands, the requirement for vaccine passes in Germany and the closure of our five stores in Austria,” he added. “Primark margin year to date has been ahead of expectations. Looking ahead we currently expect Primark sales to be significantly better than sales in the comparable period in the last financial year, from December 2020 to April 2021, when the [store network] was largely closed. ”

For now, Johnson’s Plan B reintroduces guidance for employees to work from home, if possible, starting Monday. It also expands the legal mandate requiring people to wear face masks in “most public indoor venues,” beginning on Friday. Mandates were already in place from Nov. 30 for face masks at shops, banks and public transportation. While that restriction doesn’t come into play for people eating or drinking in restaurants, exercising or singing, it will affect indoor venues such as retail doors and indoor shopping malls and centers. Plan B also requires people to have Covid passes to attend certain unseated venues, indoors and outdoor, where large gatherings are the norm. And anyone in contact with someone found to be positive for Covid will have to undergo daily testing. People who test positive will have to self-isolate.

While Plan B is just going into effect in England, other parts of the U.K. have already issued new advisories in hopes of getting ahead of a potential Omicron surge at hospitals and health care centers. For example, people in Wales and Scotland were asked to work from home, while Northern Ireland’s health minister last month advised that people should continue to work from home if they are already doing so. The Welsh and Scottish governments advised people to practice social distancing, open windows when indoors, and get fully vaccinated and a booster shot.

Johnson is trying to avoid a winter lockdown, and he’s not the only one. Similarly, U.S. President Joe Biden is grappling with the same issue.

The U.S. tends to run about three months behind European Covid trends. For now, Omicron is a “cause for concern, not a cause for panic,” Biden said, adding that there’s no cause for a lockdown “for now,” provided people are vaccinated and wear masks.

While more people are vaccinated now than a year ago, the numbers might not be enough to curtail Omicron’s spread. Many still haven’t received even their first shot of the vaccine, while others haven’t completed their two-dose regimen.

Cases in the U.S. appeared to peak in September with a daily average of about 160,000 new cases, before falling in October to a daily average of 64,000. Now that’s on the way up again to over 100,000 on average each day, coinciding with Omicron’s emergence late last month.

What happens next in terms of government policies is anyone’s guess, but maybe the good news, at least for retailers in the U.S., is that many shoppers are probably already done shopping, according to a Goldman Sachs study.