Retail Forecast 2021 - 2022

We revised our figures in April 2021, but have not updated this webpage. The forecast will be updated at the beginning of July 2021

Forecast timing. This forecast was made in January 2021. It had become clear by then that the high level of coronavirus contagion and the subsequent death rate had convinced the government to institute a virtual Lockdown (Tier 4) on most of England, whilst Wales, Scotland and N. Ireland were pursuing similar policies.

The impossibility of forecasting. Traditional macroeconomic models feed in a variety of statistics to a computer about the economy, money, government borrowing, etc which then churns out some forecasts. They do not work terribly well because there are so many possible variables with a changing impact upon other variables. When making the forecast, economists’ data input to the computer can be several months out of date. That is when retail becomes really really important. 

Retail as a leading indicator. The trend in retail sales is used by most countries as a ‘leading indicator’ of macroeconomic patterns. In simple terms, retail sales normally show what is happening to the economy in real time and so can correct some of the excesses of computer-generated forecasts based on rubbish data. Rapidly-rising retail sales may indicate higher GDP growth rates, whilst a slower growth in sales may indicate consumers are becoming more cautious so that economic growth may slow down or even fall. All this assumes that retail sales are generally free of constraint and that people can spend what they want. In a world where governments close most retail premises because they are non-essential, the previous patterns may no longer apply.

The Forecast

The forecasts will be updated to our curren thinking relating to 2021-22 in July 2021. 

Our forecast for 2021 is that total retail sales will grow by 2.4% against the terrible year, 2020. We think 2021 will be dominated in the first few months to around Easter by a Lockdown or Tier 4 controls. This will be followed by a gradual dismantling of restrictions, enabling all stores to reopen. Restrictions on hospitality may continue into summer. Unemployment will rise, but there should be strong growth in GDP which will also help retail sales. This may all start to peter out in the first quarter of 2022 or perhaps in the run-up to Christmas 2021. These assumptions are considered further below, tested using significant questions for the forecaster. 

Forecast 2021: retail sales growth (online and offline)                +2.4%

Forecast 2022: retail sales growth (online and offline)                +1.8%

Table 1

Actual and Forecast UK Retail Sales Growth (all retail: online and physical stores)


Food Sales *

Non-food sales ** 

Online Sales Online Share of Retail
2019 +2.4% +1.3% +10.7% 19.1%
2020 +5.4% -12.4% +30.2% 29.8%
2021 -1.6% +15.1% -9.1% 27.1%

*Both online and offline (physical stores)           **Physical stores only


-  Food sales have been boosted by the closure of hospitality. When hospitality is able to open again in the second part of the year we expect food sales to fall slightly by -1.6%.

-  We expect Non-food sales in physical stores to increase by +15.1% when shops reopen around Easter. This is an increase on a very grim 2020 which should be easier to achieve.

-  With Non-food stores open permanently (?) after Easter and food shopping easier, we expect a drop in online sales as we saw in 2020 after each Lockdown ended. Internet sales rose to 32.8% in May 2020, but had dropped to 26.3% by September. We are not arguing that online sales will revert to where they were in 2019 (19.1% of total retail sales), but that they will not retain all their gains.  

Forecasting in a time of plague. In 2020 retail spending held up surprisingly well in spite of Lockdowns and low rates of customer footfall compared to 2019. According to the ONS, retail sales in 2020 actually increased, if only by +0.3%.Although customers are, in general, still getting the merchandise they require, the negative impact of covid restrictions on non-food retailers has been considerable. Online sales, in contrast, have soared. Food retailers, allowed to continue operating as essential services, have found their sales distorted by covid restrictions. Social distancing and hygiene regulations have reduced the number of customers their shops can usually process. However, restrictions on hospitality (pubs, hotels, restaurants and cafes) have increased the sales of the average supermarket. The millions of prohibited meals, snacks and alcoholic refreshment have turned into additional sales of food and drink for food retailing.

A The first forecasting questions are: How long will the restrictions last? and What will be the path from ‘We have beaten the pandemic’ to the restoration of shoppers’ freedoms?

This all depends on the government, not economists. Our forecast is based on an optimistic note: that Lockdown will finish at Easter, but restrictions on hospitality may last until May. The path to zero-restriction freedom may well prove to be a very long one, lasting till 2022-3. We assume there will be no third wave of coronavirus because by Autumn most people will have been vaccinated.

B  The second forecasting questions we ask are: When covid restrictions start to be dismantled, will there be a surge in consumer demand? and, if so, How long will it last?

After Lockdown 1 ended there was a sharp rise in consumer spending and business output, so it is reasonable to expect this to happen again at the end of Lockdown 3/Tier 4. Many furloughed households or those who worked from home saved money during lockdowns because they were not travelling to work, paying for lunches, frequenting coffee shops, having meals out, taking mini-breaks or holidays. At the Centre for Retail Research we calculate that ‘forced savings’ of this kind in Lockdown 1 reduced spending by a total of £12.8bn. Much of the £12.8bn remains as savings, although some was spent last summer and over Christmas.

A bigger question is: How long will this last? The combination of supressed demand, high levels of savings and a probable ban on foreign travel for much of 2021 should keep retail sales moving. Other things being equal, as we always say, it will probably last until March 2022, but may peter out earlier, perhaps some time over Christmas. This depends on what other news comes, including the continued growth – if any – in GDP and the Chancellor’s ideas about how raise the money to pay for the vast sums he borrowed in 2020.

C  The third forecasting question we ask is: How well will the economy perform over the next two years?

If the economy continues to grow strongly, then we will soon regain the GDP level of 2019. This will improve consumer confidence, create jobs and stimulate retail spending. A major problem that needs to be dealt with is that the policies aimed at curbing the pandemic have ruined many businesses and weakened others. This will increase unemployment and curb business investment. Structural weaknesses may well make it hard to achieve the level of GDP seen in 2019 before say 2023. So one of the things we need to do as a nation is to spend more on public investment and infrastructure.

Although world economic data shows that the UK economy suffered the greatest fall in output in 2020 of any developed economy, this is probably because of its longer initial Lockdown, but is also caused by a statistical fiddle. The ONS in the UK has tried to model the actual fall in output in the public sector as well as the private sector. It is alleged that foreign statistical offices have not been as rigorous. But at best this would only bring our fall in output in 2020 nearer to the statistical mean of all developed countries.  

D  The fourth forecasting questions we ask are: How will the government reverse the increase in National Debt caused by the pandemic? and How soon will be start raising taxes and which taxes?

The leaks that come through about what may be expected about tax increases are not consistent. In the medium term, meaning 2021, it seems unlikely that the Chancellor will do something that will destabilise the economy and harm growth. However, remember George Osborne. People have talked up the prospects for a Wealth Tax, a Residence Tax (converting Council Tax into a new tax on the value of one’s house), an Internet Tax and increases in Estate Duty and Capital Gains Tax. The Wealth and Residence Taxes will both take more than a year to set up and will certainly have unintended consequences, particularly for those that are asset-rich but lack the income to pay the required tax.

Easier prospects include: an Internet Tax which could be simply established by an increase in VAT charged on online purchases, changes to Estate Duty and to Capital Gains that could be quickly done by putting new tax tables before Parliament for approval.

The problem facing the Chancellor in 2022 is whether to flirt with the danger of sending the economy back into recession by increasing various taxes sufficiently to raise a fair slab of cash (but undermine public confidence). In the longer term, strong economic growth will make reducing the National Debt much easier. Most economists are urging him (if it is still a him) to go for growth and accept the higher rates of inflation that will go with it.

E  One more question is: What will happen if another pandemic appears in 2022? Will we have to go through all this again?

Naturally there is a danger that the same system of Lockdown-restrictions-partial freedom-Lockdown will reappear. The country has learned a lot, the hard way. It probably regrets allowing the role of local public health officers to wither, the large-scale closure of spare beds in hospitals, not training enough of its own medical staff and nurses in the UK, as well as failing to ensure that the UK had its own large-scale producers of medical PPE. As Britain is an island and can control people coming in and going out it should be easier the next time around to control the spread of the virus without closing museums, libraries, pubs, restaurants and Non-food retailing for more than a limited period. A varied experience of decent project management amongst our leaders would also repay handsome dividends.

All economic forecasts are based on the use of accurate statistics, correct assumptions about the linkages between economic variables and accurate assumptions about future government behaviour, plus, in the current environment, consistent predictions about how the disease itself will perform. 

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