UK's food retail growth to slow sharply in short term -IGD

* Market forecast to grow 8.1% to 229.1 bln stg by 2026

* Discount channel forecast to grow 23.8%

* Online channel forecast to grow 21.4%

LONDON, June 30 (Reuters) - Britain’s retail food and grocery market will see unprecedented pandemic driven growth of 8.5% in 2020 slow to 1.7% in 2021 and 0.9% in 2022, as shoppers economise and the eating out industry reclaims sales, industry researcher IGD said on Wednesday.

It said the sharp decline in growth will be followed by a period of modest recovery, that will see the market grow by 8.1% to 229.1 billion pounds ($316.7 billion) over 2021-2026.

IGD forecast the recovery will be fuelled by rising employment levels, growing consumer confidence, economic recovery and the new channels and opportunities created by the disruption of COVID-19, such as quick commerce.

“The significant dip we’re forecasting in the short term is to be expected; many households will be under increased pressures, making shoppers more value conscious. The reopening of the hospitality sector ... will also divert some spend away from retail in the short term,” said Simon Wainwright, Director of Global Insight at IGD.

“That said, there’s an opportunity for the sector to engage with the many shoppers that built up savings during the pandemic and contributed to the estimated 150 billion pound savings pot, by focusing on quality and convenience as the ‘K-shaped recovery’ takes hold.”

Wainwright noted that longer term the UK grocery sector will remain bigger than IGD’s pre-pandemic forecasts, primarily driven by elevated levels of home-working benefiting stores in suburban areas, the adoption of digital technologies in-store which will alter how and where people shop, and fewer out-of-home eateries.

IGD forecast discount will be the fastest growing channel in the five years to 2026, growing 23.8% to 34.4 billion pounds, driven by new stores.

It forecast online will grow 21.4% to 26.9 billion pounds, driven by new capacity and the new quick commerce sub-channel.

The researcher expects the convenience channel to grow 12.5% to 50 billion pounds.

The supermarkets channel is forecast to grow 0.9% to 91.8 billion, while the hypermarkets channel is seen falling 2.3% to 16 billion pounds.

$1 = 0.7234 pounds Reporting by James Davey; editing by David Evans