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Deloitte comments on ONS retail sales

In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.

Commenting on today’s ONS retail sales figures, Ian Geddes, head of retail at Deloitte, said: “Retail sales continued to struggle in May, despite both values and volumes rising by 11.8% and 12% compared to April. In a month that saw two bank holiday weekends, some easing of outdoor social gatherings, and warmer weather for many, retailers may have been looking for the first green shoots of recovery to make up for lost ground in March and April.

“Overall food sales values were flat, at +0.3% month-on-month, but, whilst grocers may have hoped for stronger food sales in what is traditionally the start of barbecue season, online grocery sales remain strong, up by 21.1% compared to April and now accounting for 11.3% of all food sales. More encouragingly, non-food sales are up month-on-month in both value (+24.2%) and volume (+23.7%) for the first time since lockdown, which, for some, will mark the early signs of ‘normality’ for this time of year. However, 41.5% of non-food sales occurred online in May, up from 15.8% in February 2020 before lockdown.

“A wider disparity between online and in-store sales remains this month in spite of garden centre and hardware store re-openings. Total online sales stood at 33.4% this month, beating April’s record sales, though this is unlikely to have offset sales usually seen in-store over this period. In addition to household goods, purchases have also likely been driven by beauty products and, more notably, clothing items as many consumers continue to work from home, with an increased requirement for video conferencing and a more relaxed ‘work’ wardrobe.

“Looking ahead, as non-essential retailers begin to phase-in store reopening plans, some consumer anxiety will remain. During lockdown, consumers have pivoted to fewer but bigger food shops. Whether this trend will also translate into non-food remains to be seen. For retailers, there are two options: a difficult balancing act to between re-creating a familiar shopping experience whilst implementing and maintaining strict new hygiene practices, or innovating and re-inventing the shopping experience for a post-COVID-19 world. Deloitte data shows that 46% of UK consumers currently feel safe visiting a store, but building on this confidence will be key for drawing more shoppers back to the High Street over the coming months.”

Switzerland vs. COVID-19

Like all other countries, Switzerland has been, and still is, affected by the COVID-19 pandemic.

Cases were as numerous as those in the most affected countries. However, the number of victims is significantly lower, probably because of the quality of the Swiss health care system and better organisation and implementation of government measures.

The Swiss Federal Council (Government) is currently undergoing a gradual exit from the lockdown which will take place in three phases, on 28 April, 11 May and 9 June.

These measures seem all the more credible because containment has never been complete in  Switzerland: non-food stores and pharmacies were closed, as were restaurants, but outside these sectors population was authorised to move and work.

In terms of economy, the closure measures have, as everywhere, caused a great deal of damage and a drop in GDP of approximately 8% is expected in 2020.

This is the result of both the measures taken and the fact that, as the Swiss economy is very integrated with the economies of its neighbours, the loss of purchasing power will be felt in Switzerland.

However, GDP is generally expected to rise by the same amount in 2021, according to projections by most economists.

Assistance measures taken

The federal government and the cantons have also taken measures to support companies and employees.

These compensatory measures include direct aid to companies which had to close or those whose turnover has been significantly reduced, intervention in the payment of commercial rents, loans, loans guaranteed by the public authorities, easier access to temporary unemployment, etc.

It is recognised that these measures have been effective, although they are insufficient to compensate for the losses suffered by businesses. In addition, the Federal Government and the cantons have been very reactive, with aid sometimes being granted within only two or three days.

The future of the Swiss economy

As is the case everywhere, lockdown measures, although not comprehensive, will have medium- and long-term implications.

However, one of the important advantages of Switzerland is that the public authorities were very lightly in debt and therefore have a significantly higher borrowing capacity than most of the other European countries. In addition, the federal budget has been in surplus in recent years, and the state wisely refused to listen to those who recommended the spending of the budget bonus.

Therefore, Switzerland has now a greater capacity to intervene without jeopardising the balance of public finances and without requiring new taxes from taxpayers.

Residence in Switzerland

This is probably one of the reasons why the establishment of a company in Switzerland, or the acquisition of a Swiss residence, is to be recommended today, provided that it corresponds to reality.

There is a concern that some other countries, including in Europe, will take very heavy fiscal measures, either at the end of this year or in the following years, in order to service their very heavy 2020 expenditure incurred.

It is highly unlikely that Switzerland will be forced to take equivalent measures.

It is therefore more than probable that in the coming years there will be additional advantages in establishing in Switzerland, not because of an improvement in the Swiss tax system, but because, compared to that, the taxation of neighbouring countries will be even higher than it is today.