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New Year starts with a whimper for UK High Street

Despite the New Year sales 2009 got off to a poor start for most UK retailers, who reported that sales continued to fall sharply, and expect… View Article


New Year starts with a whimper for UK High Street

Despite the New Year sales 2009 got off to a poor start for most UK retailers, who reported that sales continued to fall sharply, and expect that February will be as tough, the CBI said today.

By Mark Higgins

In its latest Distributive Trades Survey, 16% of retailers said year-on-year sales volumes rose in the first half of January, while 63% said they were down.
The resulting balance of -47% represents another heavy fall in sales, but the decline was slightly slower than in December and broadly in line with expectations.
Looking to February, a balance of 52% expects sales to decline, which is the weakest forecast since the survey began in July 1983, although if expectations are realised sales still would not fall as sharply as in December (-55%, which was a record low).
Sales for the time of year were reported to be poor by a net 47% of retailers, and are set to remain well below average in February.
The three month moving average of sales volumes, which smooths out monthly peaks and troughs, weakened to a survey record low (a balance of -49%) following the particularly poor performance of the sector since November.
Suppliers to the retail sector were hit by another month of weak demand, as a balance of 51% of retailers reported a year-on-year fall in the volume of orders placed upon suppliers. A similarly steep rate of decline is expected in February (-53%). A balance of 19% of firms said stock levels are more than adequate to meet expected demand – a similar answer as in recent surveys.
Looking at individual sectors within the retail market, footwear & leather was the sole sector that saw sales grow compared to a year ago. All other sectors reported a fall, with durable household goods and clothing retailers hit particularly hard.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said: “The Christmas and new year trading period revealed mixed fortunes with clear divisions between value and premium retailers. Retailers caught in the middle will continue to suffer as customers vote with their feet. “As petrol costs and food inflation have come down and household energy bills are beginning to ease, consumers will have a bit more spending power, but as job losses increase retailers will face a difficult year.”

Ian McCafferty, CBI Chief Economic Adviser, said:

“Most of the retail sector continues to struggle as the recession bites more deeply, and February will be tough. It is possible that pre-Christmas discounting by some retailers numbed many shoppers to the allure of the New Year sales. “Later this year we hope to see some benefit from recent interest rate cuts, falling inflation, and the Government’s steps to kickstart lending. But retailers will still have to work hard to coax anxious consumers back into the shops.”
Wholesalers endured a very tough start to 2009, and an overwhelming balance of 91% of firms said sales were down on the year to January, though this very sharp rate of decline is expected to ease next month (-37%).
Motor traders saw sales fall for the eighth month running. The balance of 68% reporting a fall was not as bad as expected and an improvement on December (-100%), but remains very weak nonetheless. A balance of 57% forecasts a further fall in sales in February. The pain in the sector is being felt more sharply by those trading in vehicles (-79%), rather than parts and accessories (-21%).

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