High street feels the chill after worst January since 2005

The number of shoppers hitting the high street in January fell at its fastest rate for five years as the weather and the rise in VAT kept consumers away.

The snow had the biggest impact, resulting in a 30 per cent slump nationally in shopper numbers on 6 January as the near-Arctic conditions hit. Footfall was down by a less dramatic 5 per cent over the month, according to the market research firm Synovate.

With retailers managing their stock tightly and, in general, enjoying better-than-expected trading in December, the so-called January sales were also a bit of a non-event, although their importance has been declining for years.

Lord Harris of Peckham, the chairman of Carpetright, yesterday blamed the snow for a slowdown from its previous double-digit UK sales growth, but the market leader's underlying sales still rose by 2.3 per cent for the 13 weeks to 30 January 2010.

He said: "The severe weather conditions post-Christmas impacted the final weeks of the quarter, but we are hopeful of recovering some of this lost trade in the coming weeks."

A separate survey from Experian yesterday confirmed that footfall was dire in January, although the UK-wide fall of 2.6 per cent was lower than Synovate's figure. Experian, which provided a detailed breakdown of the regions, also revealed that the South-west and Wales actually enjoyed 2.6 per cent growth in footfall, in contrast to a 7.9 per slump in the North-east.

Both sets of data suggest that non-food retailers face a year of scrapping for every penny of consumer spend as household budgets are threatened by stubbornly high unemployment, wage freezes and the fear of tax cuts after the next Government is formed.

While many large retailers, such as the fashion chain Next, said the VAT rise to 17.5 per cent on 1 January did not have any impact on actual spending levels, it was cited by Synovate and Experian as hitting footfall.

Tim Denison, an analyst at Synovate, said: "The increase in VAT rate at the start of January injected impetus into December's trading, but at the expense of this month's footfall. Though, in fact, prices have remained largely unchanged, with retailers taking the hit, consumers didn't take the chance and many decided to buy before the rise was imposed."

A number of retailers, including the department store John Lewis, held back on reintroducing the higher rate of VAT in January, as did the supermarkets on many of their non-food lines.

Jonathan de Mello, the director of retail property at Experian, said: "Undoubtedly, the cold weather played a major part, but the reintroduction of VAT at 17.5 per cent also had a significant impact, in the same way that the lower rate had a positive effect on December footfall."

The number of visits to internet retailers also fell by 19 per cent between December and January, driven by the VAT hike. Robin Goad, Hitwise's director of research, said: "There is always a significant fall in online retail traffic after Christmas, but this year the December to January decline was greater than usual."