Shops expect Christmas to be worst in 22 years
Retailers are braced for their worst Christmas in modern times, as records of last month sales showed the sharpest fall in volume since 1983.
The CBI said sales in November were “heavily down on a year ago” and even worse than the previous record low in September. Expectations for the usually buoyant December were also the lowest on record as retailers felt the strain of weak consumer spending”.
John Longworth, executive director of Asda and chairman of the CBI’s retail panel, said: “Any hopes retailers had of an early Christmas present have been dashed”.
“Consumers have been extremely reluctant to spend money and shops will be crossing their fingers that the predicted cold spell and the rapid approach of Christmas drives people through their doors and gets the tills ringing.”
Consumers have reined in spending from record levels for a mixture of reasons. The delayed impact of past interest rates rises, high utility and council tax bills, high petrol prices and rising unemployment have all made them cautious.
David Willetts, the shadow Trade and Industry Secretary, said: “This is bad news for the high street and is important evidence that Gordon Brown needs to take into account when he makes his statement next week.”
Last month Mervyn King, the governor of the Bank of England, blamed the rising tax burden for the fall in consumer spending, saying that the ratio of tax to incomes had risen two percentage points. “It’s not surprising that, with that slowing, households spent less”.
Store chains are still hoping for a pre-Christmas rush, but 38% of retailers expect to take less than last year and only 15% expect to sell more.
Many analysts in the City are saying that the Bank will cut interest rates in the New Year if shoppers continue to keep a tight hold on their purses and wallets.
The CBI’s survey is at odds with other indicators. Last month the British Retail Consortium produced a relatively upbeat report and yesterday the department store chain John Lewis said its sales in the week to November 26 were ahead by 7.6 per cent.
The MFI group also beat expectations, reporting recent sales at its furniture stores down 15%. In its last update they had dropped 31%, forcing a profits warning. The shares, which are down 40% in the past year, have recently been hit by rumours of a rights issue to restructure the business. Last night they closed up 1.75p at 76.5p.