According to the latest Office for National Statistics (ONS) unemployment data (11 Aug), the number of people in work in Britain has suffered the biggest drop since 2009, while the coronavirus will take a heavier toll on the labour market as the government winds down the furlough scheme.

The grim reality is many furloughed workers no longer have jobs to go back to and that has massive implications for the retail sector, where leading companies are announcing swingeing job cuts to align costs with flagging sales which are likely to worsen as consumer purchasing power erodes.

The ONS revealed that 730,000 jobs were lost across the first four months of the pandemic, based on the number of pay as you earn payrolls – a 114,000 increase in June alone. There was also a worse than forecast claimant count change reading for July with an extra 94,400 people now seeking unemployment-related benefits.

So while the UK unemployment rate remains below 4%, the true picture is distorted by a furlough scheme that is keeping people technically employed.

RETAIL JOBS BLOODBATH

Against this backcloth, the wave of job cuts across the retail and hospitality industries we are seeing is inevitable.

UK retail footfall decreased by 42% year-on-year during July, marking a 20.5% improvement on the 63% slump observed in June, according to the British Retail Consortium (BRC) and market research outfit ShopperTrak. Store visits temporarily picked up, yet retail footfall remains significantly south of levels seen before the pandemic and the outlook for many brick and mortar stores is precarious.

Ailing Debenhams is to cut a further 2,500 jobs, dealing the latest blow to the sector. The department store joined the likes of Dixons Carphone (DC), Marks & Spencer (MKS) and books-to-stationery specialist WH Smith (SMWH) in announcing job cuts, not to mention John Lewis and Boots.

In addition, the BRC-KPMG Retail Sales Monitor (RSM) for July revealed total sales up 3.2%, marking the second consecutive month of growth since the start of the pandemic. However, over the three months to July, non-food sales declined by 4.3% overall.

As Shore Capital explains: ‘The consumer outlook remains cautious with perhaps more targeted with less impulse purchases, as a result of the social distancing measures in place.

‘We have concerns around the consumer economics for the second half of the year with rising unemployment and as the UK plunges into a consumer recession which will impact the already fragile consumer confidence.’

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