David Prosser: No happy new year on the high street

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Outlook The retail trade is ending the year as it began it. The closure of Woolworth's, completed in the first few days of January, was the UK's biggest-ever retail failure. But Threshers, which has been in administration since last week, threatens to run it close. First Quench, the parent to the business, has 1,300 stores in all, 500 more than Woolies shut in the end, and announced yesterday that 373 will be closed for starters.

Hopefully, the rest can be saved, but the collapse of Threshers should tell you something about the state of British retail: we may be moving closer to economic recovery overall, but much of the high street remains mired in crisis.

Worse, even if the UK does finally escape formal recession by the end of this year, the prospects for retail in 2010 look grim. Deloitte, the accountancy firm, reckons sales will be flat at best in the run-up to Christmas – even with the continued fair wind of the lower VAT rate, which applies until the end of the year – but down by 1.5 per cent over the course of 2010 as a whole.

It's difficult to be more optimistic. Despite the recession, the disposable income of consumers who have kept their jobs this year has been boosted by historically low interest rates. But tax rises already slated for next April – and more increases may come in the forthcoming pre-Budget report – will reverse that trend. Unemployment will rise further too next year. And if recovery does come in the final quarter of 2009, interest rate rises are possible towards the end of 2010.

Some sectors of retail, notably the supermarkets, will fare better than others. But the likelihood is that yet another large retailer will go the way of Woolies and Threshers.

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