Early white Christmas is bad dream for retailers

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The British economy, barely crawling out of the worst slump in three-quarters of a century, could suffer a sharp setback as a result of the cold weather, some analysts predict – with retailers facing the worst financial damage in the run-up to Christmas. In all, the economy could lose as much as £13bn of output, about £1bn a day.

With Christmas Day on a Saturday, this weekend should be crucial to shops, if consumers can make it to the high streets and out-of-town centres.

Howard Archer, chief economist at IHS Global Insight, said: "Consumers tend to delay purchases rather than cancel them. However, more bad weather would increase the likelihood that some may end up buying fewer Christmas presents. The problem for retailers is compounded in that many are hoping for their sales to be lifted in the final days of 2010 from consumers looking to make purchases – particularly of big ticket items – ahead of January's VAT hike".

Such constraints have already hit the retail trade in Scotland, where Tesco, Sainsbury and Marks & Spencer cannot guarantee delivery for Christmas. On-line retailers – which account for more than £1 in every £10 spent by British households – will also be badly hit by distribution problems.

The latest retail sales figures by the Office for National Statistics mostly cover the period before the last bout of snow, but were muted in any case. Anecdotal evidence suggests the larger supermarket chains have seen a switch from out-of-town stores to local branches.

Sarah Cordey, spokeswoman for the British Retail Consortium, said: "In places where there's been severe weather, it has disrupted sales. Retailers are hoping shopping which wasn't done earlier in the month will still be done between now and Christmas.

"Stores are catching up. The milder weather has brought Christmas shoppers flooding into stores, which have been busier than would normally be expected even for this time of year.".

Other sectors usually hit badly by the cold are transport, especially air, construction and leisure – restaurants, bars and hotels. Economists at Royal Sun Alliance (RSA) put the value of lost output during the recent cold snap at £4.8bn, and they estimate the Arctic blast expected from today could cost the economy £8.4bn, bringing the total to £13bn.

That's enough to make a noticeable impact on the national income and take the edge off the quarter's growth figures, perhaps by as much as 0.4 per cent, though estimates vary and the spring figure should be correspondingly higher.

Adding in last January's freeze, RSA say the total cost of wintry weather to the UK economy for 2010 could reach £27.7bn – 0.2 per cent of national product.