Lottery cuts retail sales by 2%

Shopping: HIgh street under pressure but recovery is forecast for 1996

NIGEL COPE

The National Lottery has cut retail sales growth by up to 2 per cent. But British retailers are now likely to enjoy modest but steady growth over the next two years, boosted by more expansionist government policy and a helpful Budget.

The estimate of the Lottery's impact on retail sales comes in the latest Lloyds Bank Economic Bulletin. Patrick Foley, chief economist, argues that the Lottery could explain why retail sales have been flat despite increased spending by consumers.

The upbeat forecast for retailing appears in a report by Verdict Research on expected retail trends over the rest of the decade.The consumer economy has reached a turning point, after a period of tax increases, the report argues. A giveaway Budget should boost spending, further strengthened by continued low inflation.

This view is backed by Mr Foley, who says that consumer spending will grow faster in 1996, mainly because of the growing perception that interest rates have peaked, but also because of income tax cuts in the Budget.

"Now that the first anniversary of the Lottery is approaching, we expect retail sales growth to move much more closely in line with consumer spending, which itself will be growing faster," Mr Foley said.

The forecast will come as a welcome boost to retailers, which have endured a tough 1995, hit by rising taxes, the summer heatwave and the continued absence of the "feel good factor".

Though price will be a factor in retail success, quality and choice will become increasingly important, says the Verdict Research report. The switch to larger superstores will continue as they enable retailers to display larger ranges.

Electrical retailers will see the strongest growth. Their fortunes will be boosted by new ranges of home entertainment. These have already started to arrive in the shape of the new ranges of computer games such as the Sony PlayStation and new models from Sega and Nintendo.

The DIY sector could also be set for a reversal of fortune after a period in the doldrums, as the housing market sees some recovery. Stores such as Marks & Spencer, BhS and Argos should also do well as their value for money perception is strong.