Sales dash hopes of recovery

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THE GOVERNMENT'S economic woes intensified yesterday as the Confederation of British Industry reported that high-street sales remained depressed last month and the strategy of the Chancellor, Norman Lamont, came under renewed attack from senior industrialists.

Hopes of a consumer-led recovery were dashed as the CBI reported that retail sales in August were down on a year ago - the third successive month that there has been a year-on-year decline.

The employers' organisation also warned that high-street spending this month was likely to be down on 1991 and that retailers had become more gloomy about business prospects and the outlook for jobs and investment.

Nigel Whittaker, chairman of the CBI's distributive trades panel, which undertakes the survey, said: 'While high-street sales have improved compared with the dismal trading conditions in July, it is difficult to see a resumption of the underlying improvement reported earlier in the year.'

More than two thirds of the 15,000 retailers surveyed expected no change in their situation over the next three months while wholesalers and motor traders expected conditions to worsen, he added.

The only bright note in the CBI's otherwise gloomy survey was that reported and expected price increases were at their lowest since 1983, which will boost the Government's anti-inflationary strategy.

Government policy was attacked elsewhere, however, with the most sustained criticism coming from the construction industry and building suppliers.

Amec and John Laing both forecast that there would be no recovery in the construction sector until 1994. Martin Laing, chairman of John Laing, added: 'In common with the rest of the construction and manufacturing industries we regret that the Government's dogmatic insistence on non-intervention in the economy and its rejection of any positive proposals by industry will only exacerbate the current recession.'

Sir Peter Walters, chairman of the cement producer Blue Circle, also criticised the Government for taking an 'overly complacent attitude to the length and breadth of the recession'.

The brickbats did not come just from the construction industry. Alan Jackson, chief executive of the industrial conglomerate BTR, said: 'The persisting lack of consumer confidence and the political focus on the extinction of inflation have combined to produce market conditions resembling an economic desert.'

Neville Bain, chief executive of the textiles giant Coats Viyella, said that continuing high interest rates had 'irreparably damaged' the British textiles industry.

In a cautious assessment of the economic outlook, Dominic Cadbury, chief executive of Cadbury Schweppes, said: 'The future is unforecastable.'

According to the CBI, sales of clothes and DIY goods continued to fall last month while grocers and electrical suppliers reported a flattening in demand. However footwear, furniture and carpet stores reported that trade was above last year's level.

The CBI also warned that the sharp reduction in orders by retailers and wholesalers noted in July had continued in August and was likely to affect the manufacturing sector.

Meanwhile the pound slipped closer to its floor in the exchange rate mechanism, pulled down by the dollar. It ended the day 0.11 pfennigs lower at DM2.7857, less than a pfennig above its floor in the system, but rose by just over a quarter of a cent against the dollar to close at dollars 1.9812.

Fears that a 'no' vote in the French referendum on the Maastricht treaty will prompt a devaluation of sterling - almost certainly in the company of the lira - kept interest rates tight in the money market.

Commentary, page 23

Company details, pages 23-26

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