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Retail sector shows signs of recovery and growth amidst store closures

The UK retail sector experienced significant restructuring and store closures in the past year. However, recent data suggests a positive outlook for the industry, with encouraging signs of growth and recovery.

According to research conducted by LDC and accounting firm PwC, the retail sector witnessed a net of 14 store closures per day in the previous year, resulting in 5,000 fewer shops trading across the UK. Notably, high-profile collapses such as Wilko, Paperchase, and Lloyds Pharmacy contributed to more closures than openings. Despite these challenges, the report reveals that there were 9,138 new store openings in 2023, marking the highest rate since 2019. It is important to note that a majority of these openings were driven by the hospitality industry.

One notable example of a retail business showing signs of recovery is John Lewis. Despite a 4% decline in sales, the John Lewis Partnership rebounded into annual profit on strong sales and profit growth at Waitrose. The partnership reported a profit before tax and exceptional items of £42m for the year to January 27, 2024, a significant improvement from the previous year's loss of £78m. This improvement was attributed to sales growth, gross margin rate improvement, and sustainable productivity improvements.

While challenges remain, the future trends in the sector look promising. The surge in high street and online spending played a significant role in boosting Britain's economy, leading to a 0.2% growth in national output (as measured by gross domestic product) in January 2024. This positive growth follows a recession in late 2023, raising hopes that the downturn will be short-lived.

The Office for National Statistics (ONS) reported a 3.4% jump in retail spending as the main factor behind the growth in the service sector. 

While these figures provide grounds for optimism, it is essential to remain cautious. The ONS advises against reading too much into one month's data and highlights that over the three months to January, GDP was lower than in the previous period. Moreover, GDP per capita remains below pre-pandemic levels. However, the positive growth in retail and other sectors, including John Lewis' turnaround, indicates a potential recovery in the overall economy.