Shops hit by big freeze had worst January for 15 years

Retailers hope dire sales are 'a blip' rather than a sign of further troubles to come
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The Independent Online

Britain's shops suffered their worst January trading for 15 years last month. In an ominous signal for the year ahead, total retail sales rose by just 1.2 per cent, according to latest figures from the British Retail Consortium (BRC) and KPMG.

The poor performance resulted in part from the heavy snowfalls and the rise in VAT back to 17.5 per cent, but it was still the weakest January data since 1995, when the BRC-KPMG sales monitor was first compiled. December, by contrast, saw the best retail sales since 2001. And in January 2009, store groups' sales rose by 4.9 per cent.

Stephen Robertson, the director-general of the BRC, said: "The coldest January since 1987 boosted food sales at the start of the month as shoppers stocked up, but food sales growth melted with the snow. The month as a whole was significantly weaker than December."

The big freeze also took its toll on activity in the housing market, which is a big influence on retail spending. The Royal Institution of Chartered Surveyors said a net balance of 32 per cent of its members had reported that property prices rose last month, but it blamed the "extreme weather" for a drop in buying and selling activity. The net balance of surveyors reporting falls in enquiries by new buyers hit 20 per cent.

In January, like-for-like retail sales at shops open for more than a year fell by 0.7 per cent – the worst result for 14 years. While the increase in VAT to 17.5 per cent on 1 January flattered last month's sales by lifting prices on an annual basis, it also encouraged shoppers to bring forward spending on big-ticket items to before the deadline. "The VAT change brought some sales forward to December but customers are becoming cautious again in the face of economic and political uncertainty," Mr Robertson said. "Retailers will be hoping these results are mainly a snow-induced blip, rather than an indication of further difficulties."

Chains from Marks & Spencer to Next have been warning for months that 2010 will be a tough year, as shoppers' finances come under pressure amid fears of further tax rises and job losses, particularly in the public sector, after the general election.

Mark Hudson, a retail expert at PricewaterhouseCoopers, said: "The only consensus is that no one knows what will happen in 2010. However, most think it will not be pretty, with risk on the downside. Retailers we have spoken to have all said the same: performance will be slow but steady until summer, then all bets are off until the first Budget after the election."

January's weak sales were hardly a surprise given the bad weather, the VAT increase and the fact that shops had to compare figures with buoyant sales in January 2009, he added.

Chains also kept a tight rein on their stock levels this year, which meant last month's clearance sales were largely a non-event. Food, clothing and footwear specialists all registered sales increases last month compared with last year, but homewares and furniture retailers saw their sales fall.

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