“Ambitious rescue package” could boost SMEs and kick-start innovation

As retailers head into the all-important Christmas period, the second wave of the Covid-19 pandemic has started to weigh on consumer confidence.

In the latest analysis from YouGov and the Centre for Economics and Business Research (Cebr), consumer confidence dropped by 1.1 points from September to 101.3, marking the first recorded drop since April. However, confidence is still in positive territory, as any score above 100 means shoppers are more confident than not.

The sharpest decline was recorded in the outlook for household finances, but it wasn’t all bad news. Workers’ perceptions of job security improved by two points in the past month, though the figure is still in negative territory at 87.7.

Darren Yaxley, director of reputation research at YouGov, said it is still unclear whether the drop this month is part of a bigger downturn. “As we enter the winter months, the picture will become clearer as to whether this was just a blip or the start of something more serious.”

Kay Neufeld, head of macroeconomics at the Cebr, agreed that this drop could mark a turning point in consumer sentiment. “Many businesses that have just about managed to stay afloat are threatened by the new lockdown restrictions, while at the same time government stimulus is scaled back,” Kay said.

Support could help SMEs survive Covid and create jobs
The consumer confidence figures come as the Federation of Small Businesses releases the results of its latest Small Business Index, a survey of 1,500 small firms that showed that business confidence has been in negative territory since July 2018.

The FSB has called for fresh interventions to help small businesses through this difficult period. “An ambitious rescue package for these groups is urgently needed. Local authorities should use the new discretionary funds being allocated this week to assist them wherever possible,” said FSB national chair Mike Cherry.

Mike added that, with the unemployment rate rising, the government should encourage more workers to “strike out on their own” with added start-up support. “A Kickstart Start-Up programme, inspired by the Kickstart employment initiative and building on the success of the Start-Up Loans and the New Enterprise Allowance programmes, could mark a way forward,” he said.

The index showed that a record one in four small firms was forced to reduce headcounts last quarter, and an even higher proportion, 29%, are expecting to make redundancies over the coming three months. In order to save jobs, Mike said the costs of employment must be brought down, starting with Employer National Insurance Contributions. “If we want [SMEs] to invest, innovate and expand, we have to alleviate the strain of wider government-imposed overheads, including those stemming from an outdated business rates system which continues to stifle too many community businesses all over the country.”

Food shops and online opportunities offer a bright light
Despite the difficulties felt across the retail sector, the fine food industry is in a stronger position than many.

According to official figures, retail sales in September increased by 1.5% on the previous month, with food sales in particular showing strong growth as consumers eat out less. Compared with February, volume sales in food stores were 3.7% higher in September, according to the Office for National Statistics.

“Food retailers had suggested that the peak in March 2020 was because of panic buying at the start of the pandemic, and despite seeing a notable fall in sales following this peak, spending remained high,” the report said. “This may be a result of the government tightening restrictions for other services such as bars and restaurants at the end of September, which may have encouraged spending in food stores.”

When the ONS asked food retailers how Covid-19 has affected the turnover over the last two weeks compared with what is typically expected for the time of year, 42.9% said turnover was not affected, while 21.4% said turnover had increased. A quarter said their revenues had decreased.

According to the ONS data, the opportunity for online sales also remains strong. Along with food stores, online retailing was the only other sector to be above February levels. In September, volume sales online were 36.6% higher than in February. “Despite some contraction from the sharp rate of increase in this sector, consumers were still carrying out much of their shopping online when compared with February,” the report said.

To learn more about the online opportunities available to independent retailers, download The Ultimate Guide to Online Retail here.