UK Retailers Face Supply Crunch As Christmas Looms

UK retailers are facing a double whammy of sliding sales and global supply crunch, making it tough for stores to obtain goods ahead of the Christmas shopping season, data showed Friday.

Retail sales dropped 0.9 percent in August from the prior month, with the grocery sector hit by people returning to restaurants and pubs after the lifting of virus curbs, the Office for National Statistics said in a statement.

A significant number of retailers are additionally unable to source enough products because of the supply crunch caused in large part by a shortage of lorry driver owing to Covid and Brexit fallout.

The ONS on Friday said that 6.5 percent of retail firms were unable to obtain materials, goods or services needed from within the UK in the two weeks to August 22.

Department stores were the hardest hit at 18.2 percent, followed by clothing stores at 11.1 percent.

Economists said Friday's gloomy news spells Christmas trouble for retailers.

"A perfect storm of labour shortages, supply chain issues and increased demand will continue to test retail leaders," said Oliver Vernon-Harcourt, head of retail at accountancy group Deloitte.

"Christmas will be impacted by these headwinds; there will very likely be shortages in some categories which will force consumers to make different choices."

The ONS added that almost 9.0 percent of retail businesses were forced to change suppliers or find alternative solutions.

"Managing price increases and stock shortages will be one of the main challenges retail leaders will have to address in the coming months," added Vernon-Harcourt.

The ONS said food store sales suffered in August as a result of the recovering hospitality industry, which was shuttered by lockdowns during much of the pandemic but reopened earlier this year.

Motor fuel sales however rose on the month as people ventured out more after the economy fully reopened in July.

Overall retail sales are 4.6 percent higher than before the start of the deadly coronavirus outbreak.

However, Britain's economic recovery is flattening as a result of the stubborn pandemic, supply chain bottlenecks and the elevated cost of commodities.

The economy grew at just 0.1 percent in July, while annual inflation spiked in August to a nine-year peak of 3.2 percent.

"The decline in retail sales volumes... suggests that the stalling in the economic recovery in July continued into August," noted economist Paul Dales at research consultancy Capital Economics.