Rent day nerves jangle as trade in high street hits a 16-month low

Retailers face a bruising start to the crucial final quarter of the year after the first half of September ushered in the worst trading on the high street for 16 months, according to an influential survey yesterday.

Ahead of the fourth quarter rent day tomorrow, the only ray of hope for embattled chains was that the pace of decline in sales volumes "stabilised" between 25 August and 14 September, according to the CBI Distributive Trades Survey.

While many large retailers, including Next, Debenhams and JD Sports Fashion, are continuing to grow profits, further evidence of the squeeze on consumer spending emerged yesterday.

Game Group, the computer games retailer, posted a painful £51.5m half-year loss. Meanwhile, Topps Tiles, the home improvement specialist, forecast its underlying sales would be down by 1.9 per cent over the year to 1 October, although the City expects profits of up to £13.4m. The CBI did little to lift the gloom when it said 39 per cent of retailers suffered a fall in sales volumes in the first half of September, while only 24 per cent posted a rise. The net balance of a negative 15 per cent was the worst performance since May 2010.

Judith McKenna, the chair of the CBI Distributive Trades Panel and chief operating officer at the grocer Asda, said: "Consumer confidence continues to be bruised by a combination of low wage growth, high prices and rising unemployment. Shoppers are still clamping down on discretionary spending and focused on buying the basics at the best price."

She added: "With the consumer squeeze set to get tighter with the winter utility bills rise, we expect retailers will face a challenging October." The warm weather forecast for this week will not help clothing chains.

While the CBI's September figures were worse than expected and the fourth consecutive month of falling sales volumes, they were almost unchanged on the negative balance of 14 per cent in August.

Ms McKenna said: "High street sales are sluggish but appear to be stabilising."

The CBI found all retail sectors registered lower sales and a balance of 30 per cent of retailers described sales as "poor" for this time of year. But the balance of sales volumes for the grocers, and specialist food and drinks chains were only marginally in negative territory. The picture was far uglier for retailers selling furniture and carpets, which recorded a negative sales balance of 59 per cent. Certainly, R3, the trade body for the insolvency industry, said that tomorrow's rent day – when retailers have to pay landlords three months rent in advance – could tip more ailing chains over the edge.

The previous rent day contributed to the collapse of Jane Norman, Habitat UK, Homeform and TJ Hughes in June.

Frances Coulson, the president of R3, said there had been "little improvement" in consumer spending and economic growth over the past three months. She added: "For that reason we are likely to see further retail casualties." But a deluge of retail failures is not expected this month, as chains have already bought their winter stock and banks typically wait until the tills are full in early January before pulling the plug.

Jonathan De Mello, the head of the retail consultancy at CBRE, the property firm, said: "I don't think this month's rent day will be the catalyst for increased administrations. But the picture is likely to be different in January after December's rent day."