COVID-19 provides a unique and unprecedented challenge for UK retail. Not only has discretionary spending taken a significant hit, the majority of the non-food sector has had to endure three months of mandated store closures. These two factors we estimate will see a record 4.2% decline in retail sales in 2020.

Like all periods of slowdown there is opportunity, and in particular during COVID-19 this has fallen to the grocery sector. The lockdown has provided a significant uptick in sales for grocery retailers, as consumers have naturally spent more on in-home food, and we expect this to carry into the second half bringing record growth of 6.3% to the sector. This opportunity is not without cost, indeed for most any additional profit made during this period will be wiped out by the millions having to be spent to adapt to the ‘next-normal’ that COVID-19 has brought.

Conversely the non-food sector has been hit hard by the pandemic, with a forecast 19.7% drop in all non-food retail sales in 2020. It is not simply store closures which have hit the sector, but also the drop in discretionary spending of which much of the sector trades in. Indeed those categories which trade in big-ticket items, such as furniture (-24.2%) are estimated to be particularly hard hit. For fashion the sector faces the added impact of a reduction in social activity, which is key to driving purchasing, meaning we estimated it to be one of the hardest hit categories in 2020 (-27.6%).

Any recessionary period has the effect of accelerating underlying trends in the market. For retail this means accelerating the shift toward online channels and the change in makeup of UK highstreets. Online, due primarily to lockdown but equally sustained concern around visiting stores, is estimated to grow by 24.7% in 2020 accounting for a record 24.7% of sales in the sector.

The pressure on businesses due to COVID-19 will unfortunately cause failure and alongside this a legacy of higher online penetration will mean many retailers will look to do with more with ‘fewer, better’ stores. Unlike the past recession, there will not be the rush to fill vacant units leaving physical shopping locations forever changed by the pandemic.

• The impact of COVID-19 on the UK retail market, including food, non-food and online.

• How consumers’ shopping habits have and will change in the short, medium and long term

• Opportunities and threats in the market arising from COVID-19

• How the COVID-19 recession will impact and reshape the retail market

This report examines the impact that COVID-19 has and will have on the UK retail market, with a focus on the broad impact in the food, non-food and online-only sectors.