U.K. Consumers, Retailers Hit Hard by Coronavirus Lockdown
People in trouble with debt are borrowing more, while shops are waiting to see how much business will bounce back.
(Bloomberg) -- The scale of the coronavirus’s impact on U.K. consumers is becoming clearer just as the lockdown is starting to ease.
Britons drastically reduced spending last month after about a third of families experienced a loss of income, reports on Tuesday showed. Those in trouble with debt are borrowing more, while shops are waiting to see how much business will bounce back.
Prime Minister Boris Johnson is moving to loosen lockdown restrictions that have been in place since March 23. More stores will re-open on June 15, and pubs and restaurants may be able to serve customers outside from July 4.
The orders to work from home and maintain social distancing has hit poorer people harder. One in three low-paid workers have been furloughed, lost their jobs or seen their hours cut, compared with 15% of high earners, the Resolution Foundation said.
While about a third of all Britons have reported loss of income, richer families have been more likely to improve their financial situation during the crisis, the think tank said.
Consumer spending contracted 27% in May from a year earlier, Barclaycard said. Spending on essential items from stores like supermarkets grew by 0.9% while non-essential goods such as clothing dropped 36.9%.
Still, household optimism in their finances remains high, with more than two-thirds saying they have enough savings to weather the crisis, Barclaycard said.
“While the restrictions continue to have a significant impact there are glimmers of hope,” said Esme Harwood, a director at credit-card provider.
Retail sales posted a smaller decline last month than in April, the British Retail Consortium reported. Still, it was the second-biggest drop on record and shops are wondering whether demand will return when the lockdown ends.
Personal debt has shot up during the pandemic, the charity StepChange said in a separate report Tuesday. Households have added about 6 billion pounds ($7 billion) of debt as measures to stop the spread of the disease kept people away from work.
©2020 Bloomberg L.P.
