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Retail furloughs made up 12% of UK furloughs in February

The number of furloughed retail workers fell slightly in February, with 6% fewer furloughs in Retail and 5% fewer in the UK as a whole. This puts the number of furloughed retail workers at 587,000 in February down from 624,000 in January. As a share of the total UK furloughs, retail made up 12% in February, a similar proportion as in January.

We expect furloughs to remain broadly unchanged in March, but to start gradually declining in April as non-essential stores are opening. Last year, during the first national lockdown, retail furloughs saw a steady decrease between June and October, indicating that it takes time for businesses to fully reopen. Even so, at the end of October, 220,000 retail employees were still furloughed.

Of course, current conditions are different. Output and the labour market have performed better than expected in January, as businesses and households have learned to cope with restrictions. And the successful rollout of vaccines has increased optimism among businesses and consumers alike, suggesting that the economy will recover faster once restrictions are lifted.

However, the retail industry, especially non-essential retail, has been under tremendous pressures over the last 12 months. Spend on many non-food categories, in particular fashion and health & beauty, suffered great losses. These businesses need pent-up demand to be released. To what extent that will happen remains uncertain, with many lower-income households under financial duress, hence, more likely to rein in their discretionary spending. Also, all this comes against the backdrop of a structural change playing out in earnest in the industry. The pandemic brought a significant shift to online purchases, with 46% of all non-food purchases done online in 2020, up from just 30% in 2019. Working from home means that the model of stores built around office and transportation hubs has been turned on its head.

As many behavioural changes tend to be sticky and the new working patterns will outlive the pandemic, this means that retail furloughs will also fall due to a combination of store closures and some non-food retailers going into administration.

 

 

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