Retailers suffer worst month in quarter of a century

By James Thompson
Sunday 23 October 2011 09:01

Retailers delivered their worst performance for nearly a quarter of a century last month and there is little sign of relief for them any time soon.

Some 60 per cent of UK retailers said that sales in the first half of August were lower than a year ago, while just 13 per cent said they had increased, the CBI Distributive Trades Survey revealed.

The CBI data reinforces a widely held view among retailers that it could be 2010 before consumers, who are squealing from soaring food prices, utility bills and motoring costs, return to the high street with the vigour of previous years. The survey is also the latest to contrast sharply with the Office of National Statistics' retail sales data, which showed a 0.8 per cent rise in July and have recently drawn gasps of disbelief from retailers.

The CBI said the resulting rounded balance of minus 46 per cent of retailers posting falling sales was the worst since the survey began 25 years ago, although the business organisation said it had tweaked its answering practices over those years.

The figures will add to the clarion call of retailers for the Bank of England to lower interest rates at the earliest opportunity, and came on the same day that the building society Nationwide said house prices were falling at their fastest since 1990.

Ian McCafferty, CBI chief economic adviser, said: "Retail conditions have been extremely tough this summer, and the wet August has been a further blow. Sadly, no let-up is expected as we head into early autumn. The business outlook is particularly weak and retailers are having to scale back their employment and investment plans in an attempt to ride out the storm."

All store groups are watching their costs with an eagle eye. The electricals retail chain Comet has already launched a consultation over more than 100 possible job losses. This year, a number of retailers, including the discount bookseller The Works, the furniture retailer Ilva and the value fashion chain Ethel Austin, have fallen into administration. More will follow, potentially as soon as the next rent day, which falls around 29 September.

Gavin George, head of retail at the accountancy firm Ernst & Young, said: "It is not going to get any better for 18 months."

The CBI said sales were weak across all retailers, except for grocers, which posted modest growth on a year ago. It said the sectors related to the housing market, particularly durable household goods, furniture and carpets, continued to face "very difficult" conditions. For example, all the furniture and carpet retailers surveyed said their sales had fallen between 29 July and 13 August, compared with a net balance of plus 46 per cent for the same period last year.

Mr George said: "There has been a bit of a spike in fashion [sales] in the last two to three weeks, but that has been driven by very aggressive discounting, so very little has flowed through to margins."

Today in a separate survey, the market research company GfK NOP said that while consumer confidence has risen by three points to minus 36 in August, this figure was still 32 points lower than the same month last year.

Rachael Joy, in GfK NOP's consumer confidence team, said the slight upturn should not be seen as a turnaround in core sentiment. She said: "This improvement could be down to a number of recent factors, which are mostly of short-term influence, such as cheaper petrol offers, summer holidays happening or just a general feeling of "things can't get any worse, can they?"

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