MNI DATA IMPACT: UK Sales Plummet; Borrowing Down On Tax Take

UK retail sales fell sharply in January, with most of the nation's non-essential shops shuttered, but public sector borrowing rose by much less than expected, due to a surprise increase in self-assessment tax receipts last month, data released on Friday by the Office for National Statistics showed.

Retail sales plunged 8.2% between December and January, confounding analysts' expectations of a 3.0% fall, and the worst performance since April. MNI's retail sales Reality Check highlighted the possibility of a larger-than-expected decline, with non-essential shops closed through January. Sales volumes declined by 4.9% over the same period a year earlier and fell to 5.5% below pre-pandemic levels.

As previewed in the MNI Retail Reality Check, internet sales provided the only bright spot in the diabolic month for retailers. Online sales — as measured by value — jumped by 9.2% in January and by 72.7% over the same month of 2020, taking online sales to a record-high 36.3% of all transactions.

Food store sales rose by 1.4% in January, or by 4.8% above a year early, the only category of stores (aside from the internet) to register a gain.

PUBLIC FINANCES

Borrowing declined to GBP8.750 billion in January, well below the OBR forecast of GBP24.8 billion, and the smallest total since March. Despite the monthly decline, that's the first January in a decade in which the public finances did not record a surplus.

However, January self-assessment tax receipts rose by GBP1.4 billion over 2020 to GBP16.8 billion. The government also received GBP300 million in customs duties, as a result of leaving the transitional EU trading arrangement and retained approximately GBP1 billion in monthly EU payments.- December borrowing was revised sharply lower to GBP26.844 billion from the GBP34.109 billion reported last month, continuing a trend that has prevailed since the onset of the pandemic.

Year-to-date borrowing rose to GBP270.6 billion, some GBP123 billion away from the full-year OBR forecast with two months to go in the financial year. However, the OBR has included some GBP30 billion in non-paid Covid loans in its forecast which are not contained in ONS data.

Net debt fell to 97.7% of gross domestic product from 99.2% in December and 83.4% in February.