Unique Changes in UK's Consumer Retail Expenditure during Pandemic

This article discusses the unique changes in consumer retail expenditure in the UK during the pandemic and the impact on the economy. It explores the laws of demand and supply and the major factors influencing the retail industry. Additionally, it highlights the government policies implemented to aid economic recovery.

Economics for Business

Executive Summary
UK is a mixed market economy that works on partially controlled and owned market by
the government of a country. It is operated with the demand and supply forces of goods and
services in a market. Government intervention is function when there is any odd activity occurs
and when welfare of the people is on declining stake. It is a globalised economy which has
strong economic system and finacial structure with highly developed social market.
Due to coronavirus pandemic across the world has impacted drastically leading to global
economic crisis. In UK economy is facing major economic losses due to lockdown and various
imposed restrictions in markets by the government. The economy has experienced major shifts in
demand and supply of consumer goods. It is reflected with varied fluctuations in consumer
expenditure on retail goods and services. It has created both positive and negative change on the
economy of a country. It has resulted in increasing some types of retail spending while reducing
others. Due to this unique circumstance, country has been through distressing conditions
impacting the lives of citizens.

Table of Contents
INTRODUCTION...........................................................................................................................4
Unique changes occured in UK's consumer retail expenditure during pandamic-.....................4
Law of Demand...........................................................................................................................5
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
.......................................................................................................................................................12

INTRODUCTION
Consumption of goods and services in an economy is essential for the growth and
development of markets. Economic condition of a country is influenced by the level of
consumption and expenditure in a market (Macroeconomics, 2017). Fluctuation in the aggregate
demand of consumer goods and servies leads to change in the overall economy of a country. The
market forces of demand and supply are two determinants of an economic growth and stability.
Thus, any fluctuations or deviations in consumer expenditure on retail goods and services
impacts the overall economy of a country. This can be experienced during coronavirus pandemic
leading to downfall in the economy. Due to this, UK has faced unique changes in consumer retail
spendings leading to economic crisis. The positive and negative shift in the consumer demand
for retail goods and services are discussed with the help of demand and supply analysis. Also,
various government measures and steps to stabilise the economy are discussed below.
MAIN BODY
Unique changes occured in UK's consumer retail expenditure during pandamic-
Due to corona virus pandemic, UK has faced major fluctuations in consumer retail
demand in various industries. It has seen positive and negative shifts in retail industry. Economy
runs on mixed system of capitalist and socialist in which government owns and controls some
businesses and market runs with free flow of demand and supply forces.
Demand and Supply function
Economics is refered as the study of social science with central aspects such as scarcity
and choice. It is based on the fact that resources are scarce and limited in a country. These
resources include land, labour, capital and entrepreneur are known as factor of production.
Therefore, due to scarcity of resources consumers have to make choices and includes opportunity
cost which is the next best alternative (ARUL BEC lectures, 2020). Thus, consumer demand gets
affected due to various factors based on limited resources leading to choice of alternatives. They
choose alternatives which provide maximum marginal utility and satisfaction. On the other side
consumer demand is met by supply of goods and services. Producers provide utility of money to
consumers and reaches consumer equilibrium. At the point of saturation, demand for a good is

constructed with its supply leading to optimum utilisation of resources. There are different
markets such as perfect competition, monopoly, oligopoly which affects the market functioning.
It includes number of buyers and suppliers which leads to intense competition. Mostly it has
perfect competition in the market where it has large number of buyers and sellers with similar
products. Consumers have variety of choice which helps in selecting the best alternative. There
various governing laws in economics on which it functions. These are-
Law of Demand
In this law, it states that other factors being constant price and quantity demanded of
goods and services are inversely related to each other during a period of time. It is one of the
fundamental principle in which increase in the price leads to decrease in the quantity demanded
of a good and vice versa. It is based on microeconomic where individual demand is calculated
with the change in price is divided by the change in quantity demanded. It shows negative
relationship between price and quantity demanded becausae of scarcity of resources such as
money or disposable income of an individual (Coronavirus will cause child poverty to soar. So
what can we do about it?, 2020) This is demonstrate on downward slope curve graph.
Law of Supply
In this law, it states that with all the other factors being constant it has direct relation with
the price and quantity supplied at a point of time. The quantity supplied is the amount of goods
and services supplied in a market or available to consumers. This shows that there is positive
relationship between price and supply of a good. This leads to upward slope in the supply curve
of supplier. It is based on micro level economics where individual supply of goods are calculated
in a market.
Price Equilibrium
In this demand curve intersect with supply curve at a point. This point is called
equilibrium of a consumer. It is a situation where demand and supply of a product are equivalent
for a consumer. When quantity demanded interacts with the quantity supplied it is called as
quantity equilibrium. At a price where demand and supply meets for a product is called as price
equilibrium. It is affected due to fluctuations in the demand and supply of goods due to various
factors available for a consumer (Coronavirus: People saving more but get little in return, 2020).
These factors also changes the position of demand and supply curves. It shifts from right to left

in case of decrease in the demand. It moves from upward to downward in case of decrease in the
supply of a product.
Thus, above mentioned laws of economics help in analysing market condition of a country. For
assessing at a macro level it can be achieved with addition or calculating aggregrates. It includes
aggregrate demand and supply, market supply, industry equilibrium etc. In real world they work
in combination for taking better decisions and formulating policies and plan in an economy.
Major factors determining positive and negative shifts in retail industry
Due to pandemic situation UK has experienced major crisis in various industries. The
demand for consumer retail goods is impacted because of lockdown and imposed restrictions by
government. Consequently, retail market has seen major shifts in various industries because of
stoppage in the production and complete lockdown situations during pandemic disease. This has
led to positive as well as negative outcomes in the retail market. Following are the major factors
impacting consumer retail demand in UK (Coronavirus: What are the rules for face masks or
face coverings?, 2020).
Local demand factors- Market forces, namely, demand and supply are open to integrate with
each other in UK market. There is a limit to which these forces can integrate with each other and
this limkit is set up to the mark to which customer is willing to shell out their money for a
specific product in the market. During the time of pandemic of COVID-19, there was a
hazardous situation of lock down, where people were locked in their houses and there was no
surity about future of economic condition of the country(Covid: How does the extended furlough
scheme work?, 2020). Due to lockdown, there was a serious impact on availability of factors and
due to this reason, there was a halt on the business units and important part secondary and
secondary sector, i.e., was put to halt. These segments were seriously disrupted and made the

supply curve fully flat in the economy. The major impact that this pandemic time had on was the
physical market. Due to various precautionary measures applied by the governmnert, residents of
the country were not having regular access to physical market. Also general public was not
interested in going to market, due to the reason that they were afraid of corona infection. These
all elements resulted into increase in sale of products and services through online platform.
Products like face masks, sanitisers, etc. saw themselves ascended to list of essential
products. Hoarding of products like toilet paper, groceries, antibacterial wipes were
observed which made many supermarkets put capping restrictions on some range of
products (Law of demandLaw of Supply).
1. Complimentary and substitute goods: There are two type of products on the basis of
their usage or purpose and they are substitute and complementary products. Substitute
products refers to those products and services those can be used or they can serve same
pupose for an original product. These substitute products are also seen having a
competitive demand. To illustrate, various smartphones brands available in the market.
These all brands are serving the same purpose and can be switched by the customer
easily. On the other hand, complementarty goods can be explained as those goods
which are used together. If one of the product is missing than, the other product will not
be able to serve its purpose (NATIONAL RESTRICTIONS: FINANCIAL SUPPORT
FOR JOBS AND BUSINESSES, 2020). For example, pasta and required sauces and
ingredients to cook pasta. If one of the thing is missing than, other will not be abole to
fulfill its purpose. From the above example, it is very clear that complementary

products are having joint demand. During time of coronavirus, change in trends and
demands were very clear in UK market. For example, substitute goods of different
brands show a competitive nature in demand while for essential products, it showed
complimentary nature. People were ready to buy any and all for fear of demand
shortages and for non-essentials, it showed high competition in digital shopping trends
for people had lots of free time, which they were using to research about multiple
options before picking final one. Complementary goods in essentials like groceries saw
stockpiling as discussed earlier while for non-essentials, didn’t saw much of a change
than usual demand nature.
2. The income effect and shifts in employment: Income effect is the change in demand
of goods which changes due to change in customer's purchasing power resulting from
there income. In an Economy, when money circulates in money cycle, it is said that
expenditure one person is the income of another person. For example- when people
demand of any product then they spend on that product and this results in income of
suppliers. After that, suppliers will become customers when they purchase there goods
from from other person (Rishi Sunak promises £350bn emergency rescue package for
business, 2020). And then this cycle goes on from person to person. In 2020, this
Coronavirus pandemic has changed income and employment levels of millions of
people in UK. Because many of them lose their jobs and were pushed to poverty. Some
of them getting very low salary. This severely effects the demand for many products
specially non – essential goods or luxury items. They start saving much more as
compared to before. Even national statistics office data showed that saving ratio among
UK people saw a rise of 8.6% from 5.4% in the first three months of the year as
compared to first three months of the last year.
3. Purchasing limits, subsisdies and other government intervention: In regular trading
days, there is no active involvement of UK governmental authorities in market and its
forces. Instead they are involving themeselves in application of price control on ceratin
products and services. This will be helpful in making affordability of these products for
generakl public(Stimulus package for UK's poorest families vital, report says, 2020).
This whole process is performed to safegaurd intereset of general public at a large

scale. This process is termed as price ceiling and it results in various inefficiencies like
inefficient allocation of resources and wastage of resources and providing low quality
products, etc. Another way b which governmnet intervenes in the market is called as
price flooring. This process is just opposite to above explained process as it involves
fixing the price of specific product and service at a price and businesses are not allowed
to sell that product at a price lower than that of the set price. It becomes the duty of
government to control the rate of inflation in the market so that no panic is created in
the economic environment of country. Schemes like furlough were introduced with the
primary objective of safeguarding jobs of millions of people who are integral for
revival of demand led economy of UK (Substitutes and complementsU.K. Grocers limit
items to avert a new wave of stockpiling, 2020).
Main UK governmental and economic policies to aid economic recovery from loss of consumer
retail spending,
UK governmenmt has been implementing various policies to aid economic recovery and
generating stabilisation in various activities. UK runs on mixed ecomomic system with social
positioning leading to governmenmt intervention such as framing policies and implementing
programmes for aiding economic recovery. This helps in influencing market conditions with the
changhe in macro economic factors such as tax rates, bank rates, market operations etc. The
impact of coronavirus on the economy has led to various outcomes by the government to
stabilise its economic posiotion. It includes subsidised retail products, stimulus packages for fast
recovery and retail industry measures etc. As retail industry has faced major fluctuation leading
to impact whole economy with diminishing demand for various products. These products include
luxury such as jewelery, fashion clothing, home décor etc durable consumer goods includes
kitcheware, plastic products and other non recurring products. It has increased consumption for
daily usage goods which are necessary for the living of individuals (UK consumer spending
approaches levels last seen before coronavirus, 2020). It has boosted the market for necessary
products in consumer retail market. Governmenmt has been using methods to maintain flow of
money supply in the economy.

Following are the measures and steps taken by UK governmenrt for economic stabilisation and
recovery leading to increase in the consumer expenditure
 Poverty program – This is the program that is developed by UK government in order to
reduce poverty for society as well as provide better facilities to individual. It is essential
that government is taking correct steps and developing effective program which is
significant for reduction of poverty form society. During the crisis situation of COVID 19
many people life is affected and it have impact over economic system of UK. This have
put more pressure or stress on people for full filling basic needs and facilities. It has been
determined through the Office for Budget Responsibility, that there are chances that
unemployment could rise by 9.1 % in the year 2020 (Video games top list of pocket
money spending in lockdown, 2020). In order to successfully and effectively deal with the
situation it have been analysed the poverty program of UK government will assist in
overcoming with the issues of poverty as well as reduce negative impact on COVID 19
crisis situation and increase in unemployment.
 Government transfers and subsidies
As per this program of the government it has been determined that additional £ 16 bn to
administration to Scotland, Northern Ireland and Wales with the motive of bail out their
economies. Under government transfers and subsidies it has been determined that £ 1.1
Bn has been announced for business councils with the motive of providing assistance to
business so that they could recover form economic stress or crisis situation. Small
business will receive amount up to £ 3000 per month for successfully performing
business practices.
 Industry specific measures: Government of UK has various packages those are
aimed at safeguarding specific industries and its employees operating in the
country. One significant scheme that has been announced by the governmnert is of
Furlough (Covid: How does the extended furlough scheme work?, 2020). This strategy
has been formulates so as to protect large number of employees from getting laid
off from their jobs and employment terms. According to this scheme, certain part
of salary of employees will be paid by the governmnet and rest will be paid by the

employer itself. Through this middle way, employers and employees both will be
protected.
 Stimulus packages- These are measures for pushing consumer demand
implemented by UK government for stabilising market conditions. It is achieved
with loan sanctioning packages worth £330bn to the retail businesses and others
struggling to survive in a downturn economy. The government also issued
financial handouts worth £20bn as emergency rescue package for helping
businesses. In addition to this government helped consumers with mortgage loan
through freeing or wavering down their deadlines. Also changes government was
about to consider for IR35 rules and payroll employment rules were halted. Thus,
government provide stimulus packages that will help boost up whole economy. It
focused on employment opportunities to save people from job loss that leads to
increasing consumer demand again for stabilising economy (Substitutes and
complementsU.K. Grocers limit items to avert a new wave of stockpiling, 2020).
CONCLUSION
From the above report it can be concluded that consumer expenditure impacts the whole
economy. An economy is based on consumption and expenditure by the government and citizen
of a country. The factors which influence the supply and demand forces are income of people,
price of a product, substitution effect and other factors etc. Due to pandemic, it has impacted
industries majorly due to lock down conditions and restrictions on operations of a business.
These problems lead to breakdown of an economy with no production and less consumption of
goods. Goods which are essential are consumed leading to rise in consumer retail essential
goods. Thus, other retail goods in UK faced major consequences due to unstable demand and
supply forces. For this government has taken major steps to aid recovery of UK economy and
influencing consumer demand for stabilisation.

REFERENCES
Books and Journals
Macroeconomics, Fourth Edition by Krugman & Wells, 2017
ARUL BEC lectures, PowerPoint slides, & videos: ARUL & Young, 2020.
Online
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UK consumer spending approaches levels last seen before coronavirus. 2020. [Online].
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Macroeconomics, 2017)(ARUL BEC lectures, 2020)(Coronavirus will cause child poverty to
soar. So what can we do about it?, 2020)(Coronavirus: People saving more but get little
in return, 2020)(Coronavirus: What are the rules for face masks or face coverings?,
2020)(Covid: How does the extended furlough scheme work?, 2020)(Law of demandLaw
of Supply)(NATIONAL RESTRICTIONS: FINANCIAL SUPPORT FOR JOBS AND
BUSINESSES, 2020)(Rishi Sunak promises £350bn emergency rescue package for
business, 2020)(Stimulus package for UK's poorest families vital, report says, 2020)
(Substitutes and complementsU.K. Grocers limit items to avert a new wave of stockpiling,
2020)(UK consumer spending approaches levels last seen before coronavirus, 2020)
(Video games top list of pocket money spending in lockdown, 2020)