Press release

23 Apr 2021 London, GB

UK retail sales saw marked pick-up in March as increasingly confident consumers lifted spending even before restrictions eased – EY ITEM Club comments

UK retail sales saw marked pick-up in March as increasingly confident consumers lifted spending even before restrictions eased – EY ITEM Club comments

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Related topics Growth COVID-19
  • Retail sales saw a marked pick up in March despite still being affected by the closure of non-essential retailers. Retail sales volumes rose 5.4% month-on-month (m/m) in March and were up 7.2% year-on-year (y/y)
  • This suggests that consumers were already releasing pent-up demand and spending even before restrictions had been eased. It does appear that many people were intent on having an enjoyable Easter break and this likely lifted retail sales later in the month
  • The survey pointed to a significant improvement in consumer sentiment during March, reflecting increased confidence in both the economic outlook and personal finances. There was a further, albeit small, pick-up in confidence in April
  • Online sales rose 0.6% m/m and 62.0% y/y in value terms in March. This caused the share of online sales to fall back to 34.7% of total sales in March from a record 36.2% in February, although it was still substantially up on the 23.2% seen in March 2020
  • While March's healthy rebound in retail sales added to evidence that the economy contracted less than had originally been predicted in Q1 2021, retail sales volumes nevertheless fell 5.8% quarter-on-quarter (q/q) during January-March
  • Retail sales should see a considerable lift in April from the opening of non-essential retailers from the 12th. Initial survey evidence on footfall and sales has been positive. Consumers look well-placed to play a key role in decent UK recovery developing from Q2 as restrictions on activity are increasingly eased
  • Consumer activity should benefit from recent very high savings ratios, especially as the labour market has been resilient and it now looks likely that unemployment will rise much less than had been expected. The EY ITEM Club has reduced its projected peak in the unemployment rate to under 6% from the 7.0% previously expected

Howard Archer, chief economic advisor to the EY ITEM Club, says: 

“Retail sales volumes rose 5.4% month-on-month in March despite still being affected by the closure of non-essential retailers through the month. This was a much larger rise than the consensus expectation for an increase around 1.5% month-on-month.   

“Sales volumes had previously increased 2.1% month-on-month in February. This had represented a modest rebound from the 8.2% fall in January when non-essential retailers were first closed anew as a consequence of the most recent lockdown measures.

“Retail sales volumes were up 7.2% year-on-year in March, lifted by the fact that they had fallen in March 2020 when non-essential retailers were first closed due to lockdown measures. Retail sales volumes had been down 3.7% year-on-year in February and 5.9% in January.

“Despite rising 5.4% month-on-month in March, retail sales volumes fell 5.8% quarter-on-quarter over the first quarter.

“Retail sales in March were 1.6% higher than they had been in February 2020 when the pandemic’s economic impact was yet to be felt.

“The ONS reported that, in March, ‘non-food stores provided the largest positive contribution to the monthly growth in March 2021 sales volumes, aided by strong increases of 17.5% and 13.4% in clothing stores and other non-food stores respectively. Automotive fuel retailers also reported strong monthly growth of 11.1% as travel restrictions were eased towards the end of the reporting period.’

“Meanwhile, food stores saw growth of 2.5% month-on-month.

“Online sales rose 0.6% month-on-month and 62.0% year-on-year in value terms in March. Online sales’ share of total retail sales fell back to 34.7% in March after rising to a record 36.2% in February from 35.2% in January and 29.6% in December. Still, the March 2021 share was up significantly from 23.1% in March 2020 and 20.0% in February 2020, and it is evident that the restrictions on non-essential retailers during the pandemic have given extra impetus to an already rising underlying trend for online sales.

“The annual retail sales deflator was flat year-on-year in March, with fuel prices up 3.3% year-on-year. Excluding fuel prices, the annual retail sales deflator was down 0.3% year-on-year in March.”