John Lewis's managing director has urged the Bank of England not to raise interest rates amid retail fears over how a rate increase would affect consumer confidence.
Andy Street – speaking out about inflationary pressures on the industry as he unveiled plans to open a new store in Birmingham in 2014 – said: "Putting up interest rates would not make a jot of difference to inflation. But it would make a big difference to consumer confidence."
Mr Street's view reflects the debate going on among economists about how much impact, if any, a rise in interest rates would have on dampening domestic inflation or whether Britain has imported higher prices.
However, the odds on the Bank of England lifting rates from 0.5 per cent in May shortened yesterday after Martin Weale, a member of its rate setting committee, said that tightening monetary policy now could reduce the need for interest rates to rise more sharply further down the line. A 0.25 per cent rise in interest rates would add about £40 to the monthly bill of the average British mortgage holder.
Mr Street said such an increase would have both a "psychological and real" impact on consumers and he is not alone among big retailers in fearing the consequences of such action.
Weekly sales at John Lewis, the bellwether of the high street, have been more subdued in recent weeks, supporting the view that consumers are reining in their spending.
"We did have a barnstorming year in 2010 and it is much more subdued now," said Mr Street. But he expects the pressures currently affecting consumers – such as a hangover from spending being pulled forward before VAT rose to 20 per cent last month and uncertainty over public sector job losses – to ease. John Lewis is still "predicting small underlying growth for the year", he said.
John Lewis, which last opened a full-line department store in Cardiff in 2009, confirmed it will open a 250,000sq ft shop adjacent to Birmingham's New Street train station, creating 650 jobs. Scheduled to open in 2014, will be one of the largest John Lewis department stores outside London.
As part of a £100m redevelopment project, John Lewis will anchor the upgraded Pallasades shopping centre.