Brexit and the ongoing Covid pandemic have had a major impact on the retail industry in the UK, causing significant supply chain problems, according to a report by the Confederation of British Industry (CBI). Despite this, retail sales in the UK have seen the sharpest growth since December 2014 in the year leading up to August, reaching a record high in orders growth. Sales were also considered to be “above average for the time of year.” However, the combination of worker shortages and disruptions in transportation due to Covid and Brexit has resulted in a significant decline in the amount of stock available compared to expected sales.

The CBI survey, which included 104 companies, with 42 being retailers, revealed that stock levels in the retail and distribution sectors have reached an all-time low. This marks the fifth consecutive month in which stock levels have hit record lows. In addition, the proportion of deliveries from suppliers accounted for by imports has fallen sharply.

Despite these challenges, businesses expect orders and sales growth to continue, albeit at a slower pace in the coming months. Average selling prices increased at the fastest rate since November 2017 in August, and respondents anticipate a similar trend in the month ahead.

Investment intentions for the next 12 months have also improved, reaching their highest level since February 1994. Retailers overall expect the business situation to improve slightly in the next quarter.

Alpesh Paleja, the lead economist at CBI, recognized the impact of consumer demand on economic recovery and the potential shift in household spending towards consumer services. However, he emphasized the ongoing operational challenges faced by retailers, including record-low stock levels and falling import penetration. The situation has been worsened by labour shortages, particularly among younger employees.

Paleja highlighted the recent changes to self-isolation rules, which have helped mitigate the impact of the “pingdemic” on businesses. However, he stressed the importance of maintaining progress in the vaccine roll-out to younger age groups in order to boost confidence and successfully navigate the next phase of the pandemic.

Overall, although the UK retail sector has seen strong sales growth, the challenges arising from Brexit and Covid-related disruptions in the supply chain have had a significant impact on stock levels and importation. The industry remains optimistic about future growth but acknowledges the need for solutions to address these operational challenges and labour shortages.

Useful links:
1. BBC: How are supply chains being affected by Brexit?
2. Retail Gazette: Retail’s stock levels lowest on record amid supply chain disruption