High street sales up but 'more stores to close'

Tuesday 10th February 2009

More high street stores could close as consumer spending remains weak, it was warned today.

Data from the British Retail Consortium show total sales rose in January by 3.2 per cent - the first rise since September. Like-for-like sales rose 1.1 per cent.

However, the rise in spending was due to an increase in food sales – up 5.1 per cent on a year ago on a like-for-like basis – which in turn was due to higher food prices.

The BRC noted a rise in shopping for basic products, and greater demand for cheaper seasonal vegetables as more Brits look to save money by cooking from scratch.

Sales of electrical goods were up slightly – but this was said to be due to greater discounts.

Helen Dickinson, head of retail for accounts KPMG, which collates the data, said the rise in sales did not "mean consumer confidence has returned".

"The results are heavily skewed by food prices creeping back up again after the heavy promotional activity in December and by a reasonably strong performance in the first week of the month, caused by the continuation of a short-lived pick up in spending immediately after Christmas," she said.

Stephen Robertson, BRC director general, added: Director General, British Retail Consortium, said: "The fundamentals haven't changed. Job fears are mounting. Consumer confidence is at record lows.

"It remains to be seen whether January’s discount driven growth was just a blip."

Howard Archer, chief UK economist at Global Insight, warned the BRC figures point to the prospect of more stores closing.

"There seems little doubt that retailers face a desperately difficult time as consumers cut their spending substantially in the face of major
headwinds," he said.

"This will keep pressure on retailers to price competitively through the year, which will obviously impact on margins. As a result, many more retailers seem certain to go under over the coming months."

He added low interest rates were also failing to boost shoppers' spending, as lower savings rates were "hitting many people hard".

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