The impact of the UK’s third lockdown on the economy has been laid bare by official figures showing that spending in stores and online fell by more than 8% last month while government borrowing was the highest for a January since modern records began. All sectors of retailing except for food and online outlets were affected by the imposition of tough new restrictions across the UK, and although the Office for National Statistics said the decline was not as severe as the 22% drop in the first lockdown last April, it was substantially worse than the 3% drop the City had expected. Rishi Sunak is planning to announce fresh support for retail and other hard-hit sectors of the economy in next month’s budget but the chancellor made it clear that action to repair the damage would eventually be required. “Since the start of the pandemic we have invested over £280bn to protect jobs, businesses and livelihoods across the UK - this is the fiscally responsible thing to do and the best way to support sustainable public finances in the medium-term,” Sunak said. “We have been able to respond comprehensively and generously through this crisis because of our strong public finances. Therefore, it is 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.” The closure of non-essential stores hit two sectors – clothing and footwear, and household goods – particularly hard. Clothing sales were down 35% from December, while household goods registered a drop of almost 20%. A breakdown of the ONS data found that with the closure of stores on high streets and in shopping centres, consumers switched to buying online. Online spending accounted for a record 35.2% of sales last month, up from 29.6% in December 2020 and 19.5% in January 2020. After steadily recovering from the impact of the initial pandemic-induced lockdown during the course of 2020, retail sales in January were 5.5% lower than they were when the global crisis first hit the UK in February last year. Meanwhile, separate ONS figures for public borrowing – the difference between what the government spends and what it receives in taxes – stood at £8.8bn last month, the first deficit in 10 years. January is usually a strong month for the public finances because receipts from self-assessment returns arrive in the government’s coffers but the ONS said a small annual increase in tax receipts was outweighed by higher spending, up almost £20bn on a year earlier. The total included £5.1bn of expenditure on coronavirus job support schemes. In the first 10 months of the 2020-21 financial year, ONS figures show the government borrowed £270.6bn – up by £220bn on the same period of the previous year and comfortably the highest on record. With February and March usually heavy months for borrowing even during years when the economy is not subject to restrictions, analysts expect the final total for 2020-21 to be well in excess of £300bn, although not as high as the £370bn forecast by the independent Office for Budget Responsibility in November 2020. Paul Dales, a UK economist at Capital Economics, said the drop in retail sales volumes in January was twice as big as the 4% fall during November’s lockdown. He added: “It would have been even worse if the government hadn’t used £8.8bn of borrowing to support the economy.” Jace Tyrrell, the chief executive of New West End Company, which represents 600 businesses on Oxford Street, Regent Street, Bond Street and in Mayfair, said retailers were waiting with bated breath for Monday’s announcement by the prime minister of the roadmap out of lockdown. “We require clarity and decisiveness to ensure that there are no further lockdowns, and assurance from the government that support will be made available to retailers in bridging the gap until sales can properly resume,” he added.