British retail sales tumbled in January as shops went back into lockdown, official data showed, but lower-than-expected public borrowing gave at least some relief to finance minister Rishi Sunak as he prepares his next round of emergency spending.

Retail sales volumes slumped by 8.2% from December, a far bigger fall than the 2.5% decrease forecast in a Reuters poll of economists and the second largest on record.

"The only good thing about the current lockdown is that it's no way near as bad for the economy as the first one," Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April's 18% plunge reflected the growth in online shopping.

The Office for National Statistics said public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, but the deficit was a lot less than a forecast of 24.5 billion pounds in the Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting the surge in spending and tax cuts ordered by Sunak.

That figure does not yet include losses on government-backed loans which are likely to add 30 billion pounds to the shortfall this year, according to the Institute for Fiscal Studies think tank.

Sunak is expected to extend the government's wage subsidies, at least for the hardest-hit sectors, in his budget statement on March 3, but he said on Friday the time would come for a reckoning.

"It's right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I'll always be honest with the British people about how we will do this," he said.

Some economists see higher taxes sooner rather than later.

"Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters' minds by the time of the next general election in May 2024," Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds or 97.9% of gross domestic product, a share not seen since the early 1960s.


Britain's economy - which had its biggest slump in 300 years in 2020 when it contracted by 10% - will shrink by 4% in the first three months of 2021 before recovering thanks to the country's fast COVID-19 vaccination programme, the Bank of England says.

Prime Minister Boris Johnson has said he will lift the lockdown in England only gradually.

But a survey showed consumers were their most confident since the pandemic struck. (Full Story)

"The hope, and our expectation, is that when the lockdown is finally lifted, we will see a surge in consumer spending, rather than a more permanent scarring of the consumer confidence," James Sproule, an economist at Handelsbanken, said.

Retail sales in January were down 5.9% compared with the same month in 2020.

Department stores and clothing stores saw the sharpest fall last month while online shopping rose to its highest ever share of total spending at 35.2%.

On the public finances, the ONS said central government tax receipts fell by just 800 million pounds from a year earlier, helped by self-assessed income tax payments which rose after a delay in an earlier deadline.

It also said there was a 300 million-pound revenue boost from customs duties, which until last month went to the European Union, and for the first time Britain paid no contribution to the EU budget which used to average 1 billion pounds a month.

($1 = 0.7160 pounds)