The general health of UK retail is at all-time low

The general health of UK retail is at all-time low
The KPMG/Ipsos Retail Think Tank has determined that the UK's retail health worsened severely in the second quarter of 2020, especially with the "unimaginable low" during April.
// Q2 2020 saw retail health plummet by 10 points to a record low RHI score of just 61
// RTT predicts that health will improve by 3 points as pent up demand is released
// However, this will depend on the general mood music, the unwinding of the furlough scheme and its impact

The general health of the UK’s retail industry is at an all-time low but pent up demand may offer a lifeline, a quarterly index has suggested.

Following its latest health assessment, the KPMG/Ipsos Retail Think Tank (RTT) has determined that the UK’s retail health worsened severely in the second quarter of 2020.

The RTT’s Retail Health Index (RHI) fell by 10 points, bringing the index to a record low of just 61 – down nearly 40 per cent if compared to its initial basing, an RHI score of 100, in 2006.


Despite this, the RTT stressed that there have been promising signs in recent weeks, especially with the latest BRC-KPMG Retail Sales Monitor showing total sales up 3.4 per cent in June.

The RTT said that throughout the second quarter, performance appeared to improve month-on-month, albeit April’s performance was “an unimaginable low” and was subsequently hard to recover from.

Despite the recent uptick, the lockdown restrictions on non-food retailers severely weighed down health overall.

However, when looking at food retail versus non-food retail, the RTT said the former’s health was strong, while non-food’s health was drastically low.

Looking ahead, the RTT believes the third quarter of 2020 will be more promising, with the unleashing of pent-up consumer demand helping to revive health to a degree.

Although the RTT still had “major concerns” around how long that uptick could last, it expected retail health to recover by three points to move the overall RHI score up to 64.

The RTT stressed that this would be dependent on how the “mood music” plays out in the coming months, such as the unwinding of the furlough scheme and its impact, the return of rent deman, and the improvement of non-food retail at the expense of food retail.

“While many retailers will have been expecting a challenging second quarter, few would have been able to comprehend the extent of Covid-19’s impact, nor the length and breadth of the lockdown restrictions that came along with it,” RTT member and Nielsen head of retailer insight Mike Watkins said.

“The fallout was certainly worse than anticipated earlier in the quarter, but the return of growth in the last few weeks has provided slight relief for the lucky few that have been able to capture it.

“What is clear is that not all sectors of retail have been impacted equally. With the closure of restaurants and pubs and limited travel, the shift away from out of home consumption has been somewhat of a bonanza for grocery – logistical challenges aside – while non-food retail, especially fashion, has really suffered.

“Overall, there is no doubt that retail has been weakened by the pandemic and the impact of that will be more structural change to business models.”

HSBC head of retail and fellow RTT member James Sawley said the pent up demand from consumers should be “real opportunity” for retailers in the coming months.

“But it’s unlikely to undo the damage of sales lost earlier in the year,” he said.

“The key question now is: how long will the release of pent up demand continue?

“There are naturally real concerns growing around the threat of unemployment and the possibility of local resurgences of Covid-19, which retailers will need to be on the alert for.”

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