Consumer cash crisis turns the screw on the high street

Mark Leftly@MLeftly
Sunday 04 January 2009 01:00

A quarter of all British families will have no disposable income in 2009, dealing yet another blow to the beleaguered retail sector.

In November, a survey by Nielsen, the market research firm, and trade body the British Retail Consortium (BRC) found that 21 per cent of families had no spare cash left after essential living expenses. However, sector insiders expect this to grow to at least 25 per cent by the spring.

A PricewaterhouseCoopers (PwC) survey last week showed that six in 10 people believe they will have less disposable income in 2009 than they had last year. Those in the lower socio-economic DE classifications were particularly gloomy, with nearly 70 per cent convinced they would have less money to spend on the high street.

Stephen Robertson, director-general at the BRC, said: "A fifth of all families had nothing left to spend [after core expenses] and I think that will get worse during 2009."

A leading retail figure predicted that the next Nielsen/BRC survey, due in May, will show at least 25 per cent of families lacking the cash needed for minor luxuries.

Andy Garbutt, director of retail at PwC, added: "The increase in unemployment and the falling level of bo-nuses mean it would be no surprise that about a quarter of families would not have disposable income."

Food retailers are believed to have been almost as hard-hit as fashion stores over Christmas, according to Mr Robertson, but the supermarkets have come out fighting this month.

Asda cut the price of 1,000 products to £1 each on Friday, with chief executive Andy Bond admitting that "2009 is going to be a very difficult year" for its customers. But he added that Asda had enjoyed one of its most successful-ever festive periods.

Morrisons will follow Asda's tactics tomorrow, with selected fresh fruit and vegetables, including six-packs of Golden Delicious apples and 1.5kg of onions, selling for £1.

On New Year's Day, Tesco reduced its petrol by 3p per litre, and it is now considering which products it should discount in response to Asda's move.

Sainsbury's, widely acclaimed last year for the price strategies led by chief executive Justin King, plans to expand the number of its low-cost "Basics" products to around 630, from 550, by the end of this month. About half the goods in this range are priced at £1 or less. Sainsbury's is also expected to issue strong third-quarter results this week, while fashion chain Next and department store giants Marks & Spencer and Debenhams could show depressed sales figures.

Retailers have suffered a miserable two months, with a number going into administration. The highest-profile casualty has been Woolworths, with around 200 shops due to close yesterday and the last stores expected to be shut on Tuesday, marking the end of a 99-year trading history in the UK.

Adams, the children's clothing retailer, appointed PwC as administrator on New Year's Eve, putting more than 3,000 jobs at risk across 271 stores.

Experian, the market research firm, has estimated that 1,600 UK retailers could shut in 2009, of which some 230 would be food sellers.

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