Shops reel after four years of pain

'Severe' damage for retailers prompts call for Chancellor to scrap fuel duty rise

The financial crisis has wreaked "severe and long-lasting" damage on Britain's high street in the four years since the collapse of Lehman Brothers, retailers warned today.

The British Retail Consortium research, timed to mark the fourth anniversary of the banking failure which nearly brought down the world's financial system, showed sales growing at less than half the rate they were before recession struck in 2008, laying bare how a sustained consumer downturn has hammered the biggest names in the sector.

Its report said: "The impact of the global financial crisis on UK retailers has been severe, long-lasting and continues to be felt."

Official figures are set to confirm the UK's double-dip recession extending into a third quarter between April and June, with the economy still 4 per cent below its pre-recession peak.

The health of consumers – accounting for around two-thirds of the economy – are vital for recovery prospects, but a looming inflation squeeze this winter as energy bills rise threatens a fresh blow to household budgets.

The BRC's findings will add to the jitters among retailers as they prepare for the quarter covering Christmas, when many chains make about 40 per cent of annual profits. While many big retailers, including John Lewis, Dunelm and Primark, continue to grow sales strongly, a number of others are struggling. HMV, the music, games and DVD group, saw recent sales fall 11.6 per cent, while fashion brand French Connection is also under pressure. JJB Sports is on the brink of administration and half of its 180 stores could be closed.

The trade body revealed that growth in the total value of retail sales has averaged just 2.1 per cent over the last two years to the end of August. This is below the rate of inflation, meaning that the high street is going backwards in real terms. The sluggish sales contrast with the far bouncier 4.5 per cent average seen in 2006 and 2007, before total sales were sent crashing by Lehman's failure in 2008.

Stephen Robertson, the BRC's director general, said: "Four years on from this key event in the banking crisis, which sent retail sales plummeting, sales growth is still less than half what it was before."

The BRC called on the Government to do more to help retailers, such as by freezing business rates, as the Liberal Democrats kick off the party conference season. He also urged the Coalition Government to "restore consumer confidence" by controlling the costs it imposes on household budgets, including "scrapping" the postponed fuel duty increase scheduled for January.

For companies, Mr Robertson called for business rates to be frozen after two years of "substantial" rises.

He said: "Any successful economic fightback needs a return to strength for the retail sector. It's not enough just to talk about growth. We need the Government to rebuild confidence, support customers and retailers and get spending going again by holding back the costs it is responsible for."

He added: "Scrapping the postponed fuel duty rise, now due in January, and freezing business rates next year are top of my list."

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