UK retail sales partly recovered in May, driven by reopening DIY stores and garden centres, as Britain’s consumer watchdog announced plans to extend payment freezes on credit cards.
The amount of goods sold last month jumped by 12%, after tumbling to a record 18.1% fall in April, the first full month of shutdown measures imposed during the coronavirus pandemic.
Shops selling household goods, such as hardware, furniture and paint enjoyed a 42% rise in sales, according to data from the Office for National Statistics (ONS) published on Friday.
But despite the May rebound, retail sales still remain well below pre-lockdown levels, down 13.1 per cent compared to February, before the impact of the health crisis.
DIY sales drive retail spending
Non-food stores saw the biggest increase in sales last month, with DIY sales providing a bright spot.
“According to retailers in this sector, consumers appeared to be carrying out home improvements while spending more time than usual in their homes,” the ONS said.
However, Pantheon Macroeconomics chief UK economist Samuel Tombs cautioned that the overall consumer outlook “remains bleak” and is not a sign that “the economy is embarking on a healthy V-shaped recovery”.
Tombs added: “Retail sales account for only a third of households’ overall spending. Naturally, spending on goods will recover faster than on services, which usually require human contact and remain largely unavailable.”
The data comes as UK markets watchdog Financial Conduct Authority (FCA) proposed that credit card firms, such as Visa and Mastercard, extend the current freeze on card payments by a further three months to help borrowers in difficulties due to the crisis. The move also applies to personal loans.
Borrowers who have yet to take up a payment freeze, along with those who had not yet applied for a £500 interest-free overdraft with their bank, have until the end of October to ask for one.
UK debt jumps as government funds 9 million furloughed workers
The watchdog first brought in the new rules for overdraft, credit card and personal loan borrowers in April, with three-month payment holidays taken by more than 1.65 million people by the end of last month.
FCA interim chief executive Christopher Woolard said: “The proposals we’ve announced today would provide an expected minimum level of financial support for consumers who remain in, or enter, temporary financial difficulty due to coronavirus.”
But he added: “Where consumers can afford to make payments, it is in their best long-term interest to do so, but for those who need help, it will be there.”
A three-month payment holiday on a credit card with an annual percentage rate of 29.9% and a £4,000 balance would see £270 interest added during the break.
Also, on Friday data revealed that a jump in Treasury borrowing in May meant that British government debt is greater than the size of the economy for the first time since 1963.
The UK government owes its creditors £2.009trn, according to the Office for National Statistics, as Prime Minister Boris Johnson’s administration funds thousands of firms and around nine million furloughed workers through the pandemic.
This follows £55.2bn of gilt issuance last month, a record nine times higher than May last year.
In April and May, the height of lockdown measures, government borrowing is estimated to have been £103.7bn, which is £87bn more than in the same two-month period last year, another record.
AJ Bell personal finance analyst Laura Suter said: “The amount we all paid in tax fell again in May, as the country entered its second month of lockdown and huge swathes of the population were furloughed or saw their income hit.”
She added: “The Government now faces a perfect storm of plummeting tax receipts at the same time as spending has soared, meaning some very large plugs are going to have to be found to stem the holes in the public accounts.”