Struggling retailers pour scorn on ONS's upbeat high street sales data

BRC says incomes are down and consumers are cutting back

A dispute over the state of the high street broke out yesterday as the British Retail Consortium accused the Office for National Statistics of producing sales figures that "paint an overly rosy picture" of shopping in the UK.

The ONS initially caused considerable pre-Christmas cheer yesterday, as its latest data indicated that the value of UK sales grew by 0.7 per cent in October, from September, and by an inflation-busting 5.4 per cent from the year before.

The Government's official statistics office put the surprise sales rise down to "pre-Christmas sales and in-store promotions", with supermarket wars helping push prices down by 0.4 per cent in October.

However, the British Retail Consortium dismissed the figures, arguing that they underestimated the extreme difficulties retailers are experiencing on the high street. To make matters worse, they implied conditions were improving, when they are actually deteriorating, said the BRC, which has a history of disputing ONS figures.

Stephen Robertson, the BRC's director general, said: "Most retailers won't recognise the overly positive picture being painted by these ONS results. The reality is disposable incomes are down on a year ago and customers are cutting back."

The BRC said its figures for October show that the value of sales grew by just 1.5 per cent, compared with the year before, "meaning customers are actually buying less when the impact of inflation is factored in".

Furthermore, yesterday's ONS figure represent an improvement on the 3.7 per cent year-on-year rise it recorded in September. But the BRC figures have gone the other way, with its October figure representing a decline on September's 2.5 per cent increase.

A BRC spokesman said: "We've had little spats with the ONS over figures before when they were similarly over-rosy. They have in the past been the target of scepticism and forced to justify their figures."

ONS declined to address BRC's attack, although a spokesman insisted the group stood by its figures.

Many in the industry were surprised, if not sceptical, by the ONS data, especially as it came just a day after the latest survey of consumer sentiment by Nationwide building society found confidence to the lowest level last month since the series started in 2004.

"The retail sales data certainly bodes well for fourth-quarter personal spending. However, we would not read too much out of the data as they clearly diverge from the overall picture," said an analyst at Newedge Strategy.

" Indeed the general outlook is set to remain sluggish," the analyst added.

Samuel Tombs, an analyst at Capital Economics, said: "October's official retail sales figures suggested that the intensity of the fiscal and inflation squeezes on consumers has not kept them away from the high street. But we doubt that the figures signal that the double-dip in overall consumer spending is drawing to a close." The BRC's Mr Robertston, took the opportunity yesterday to call on the Chancellor "to support households and businesses by holding back the costs he's responsible for".

He added: "He should scrap the increases in fuel duty planned for next year and reduce the threatened 5.6 per cent business rates rise. At a time when youth unemployment has passed the 1 million mark, promoting growth in a sector where under 25s make up a third of the workforce should be a priority for the Government."

More trouble in stores at high-street giants

Mothercare and French Connection appeared to throw down the gauntlet to the ONS yesterday, as they became the latest members of the high street to report extreme difficulties.

On the day that the ONS reported that Britain's high-street sales increased by 0.7 per last month, Mothercare and French Connection disappointed their investors so much that their shares dived by 18 per cent and 15.5 per cent, respectively.

For its part, Mothercare unveiled an £82m loss for the first half and slashed its dividend by more than two-thirds, as the retailer's performance in Britain dragged the wider group down.

Alan Parker, Mothercare's executive chairman, said: "The Mothercare group has had a difficult first half. Whilst the international business continues to perform strongly, our performance in the UK illustrates the extent of the challenges facing the business in a weak economic and consumer environment."

French Connection issued a profits warning, saying weak sales meant it was "unlikely" that full-year profits would meet its "original expectations". The group revealed revenues had fallen 10 per cent in the past three months on poor sales of its winter ranges.

A spokesman said: "The UK fashion shopper continues to act very cautiously and, in addition, the unseasonably warm weather has had a negative impact on sales of our winter ranges."

Shareholders were particularly disappointed by French Connection's announcement since it came just two months after Stephen Marks, the group's chairman, said the chain was "firmly back on a growth path", making it well placed to grow its business overseas.

French Connection said it was hopeful revenues in December and January would be better than a year ago, but admitted it was now too far behind to catch up for the year.

In a further sign of the difficulties on the high street, John Lewis's latest sales figures show revenues down by 0.8 per cent year on year in the first half of this trading week.

Tom Bawden

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