OUTLOOK: Small shopkeepers lose out in high street surge

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The easy headline about yesterday's surge in the growth of retail sales is that the high street is booming again, the economy has more momentum than we expected, and Britain is in danger of entering the inflationary danger zone.

Up to a point this is fair enough, but the full message of the retail sales figures is a bit more subtle. Some parts of the retail sector have clearly started to catch up with the recovery. Their aisles are blessed with trolleys and they are now being towed along by strength in other areas of the economy.

The out-of-town centres and the big department stores are the beneficiaries of the improvement in sales volumes. Take Meadowhall, Sheffield's megalithic mall. It reports its busiest Christmas since it opened in 1990, and sales so far in the new year are 13 per cent higher than in the first fortnight of 1994. It expects 30 million visitors in the year to next September.

Meanwhile, despite the blessing of the national lottery, many local shops are trading unprofitably - as they have since the recession began. If the gloomiest forecasts come true, local high streets will echo to the sound of shop windows being boarded up in 1995, even as the national figures for retail sales improve.

If higher base rates are the right way to keep the rise in spending under control, it could be the final nail in that boarded storefront for many small retailers. Those that have been losing money for three or four years could do without even higher overdraft charges on the one hand and consumers restrained from local impulse buys by the state of their own finances on the other. Many small shop owners believe they will not survive the latest increase in business rates.

The Chancellor and the Bank of England must be fed up to the back teeth with all the calls for an instant interest rate reaction to the latest statistic - they are, after all, in the business of long-term economic management, not short-term tinkering. Only some parts of the economy appear to need slowing down. Others need a base rate increase like a hole in the head.

Yet that is what the financial markets seem to want and, as previous minutes of monetary meetings indicate, the Governor is sensitive to market pressure.