Retailers facing gloomy Christmas

The outlook for retailers in the run up to Christmas is looking increasingly gloomy as a key survey today revealed the sector cut jobs at the fastest rate in two years amid falling sales.

Employment in the retail sector, which makes up 11% of the UK economy, fell at the fastest rate since November 2009 as more businesses surveyed by the CBI said they had reduced staff levels than those who had bumped up numbers.

The job cuts came as high street sales volumes fell for the sixth month in a row at the fastest rate in 20 months, the CBI said, with the decline driven by grocers, department stores and clothing retailers.

Samuel Tombs, UK economist at Capital Economics, said: "We doubt that retailers can bank on the seasonal surge in sales in the run up to Christmas being as large as in recent years, given that employment is now falling sharply, the squeeze on real incomes remains intense and consumer confidence is still at very low levels."

The high street's latest casualty emerged today as clothing retailer Jacques Vert issued a profit warning for its full-year performance as sales in recent weeks fell into the red, sparking a 13% plunge in its share price.

The CBI survey will fuel fears that the critical festive season is set to be a flop while other indicators, such as purchasing managers' indices, have also shown a struggling retail sector.

Ian McCafferty, CBI chief economic adviser, said: "Retailers may be hoping that shoppers will loosen their purse strings in the run up to Christmas, but consumers are likely to remain cautious about spending given the uncertain economic outlook."

Elsewhere, the CBI survey revealed that the volume of orders placed with suppliers fell at the fastest rate since March 2009 and more retailers predicted a further fall in orders than those forecasting an increase.

Prices on the high street remained well above average in November, with most retailers warning prices are expected to stay at the same levels in December. The survey will concern the Bank of England, which is tasked with keeping a lid on inflation and has forecast an easing in the increase in the cost of living.

The Chancellor, who is expected to reveal measures to boost growth in his autumn statement tomorrow, will be concerned by figures in the survey which show most retailers are scaling back investment plans over the next 12 months.

Howard Archer, chief UK and European economist, said the survey was a blow to fourth-quarter growth prospects and raised the question of how retailers will respond.

He said: "Given the pressure that consumers are under, will retailers become increasingly generous in their promotions or discounting over the coming weeks, particularly those whose sales have got off to a very slow start?"

PA