Concerns raised over Christmas as high street sales fall 1.5%

Published on Monday 13 October 2008 21:53

GROWING financial pressures hit retailers last month with the British Retail Consortium revealing that like-for-like sales fell 1.5 per cent in September.

Excluding those in newly-opened stores, sales have been down in six out of the past seven months, the BRC's latest figures show.

Retailers have already felt the squeeze this year as inflation and dearer mortgages hit shoppers' disposable incomes.

The current run of falling sales is the worst since 2005.

BRC director-general Stephen Robertson said: "The financial turmoil has further undermined consumer confidence."

Now the retail sector has a nervous eye on the impact of the current crisis on the looming festive season.

Helen Dickinson, head of retail at survey sponsor KPMG, said: "The key question now is not what has happened but what will be the impact of the current environment on sales over the crucial Christmas trading period – many will be holding their breath."

During September, big-ticket furniture sales saw their biggest year-on-year fall for eight years as shoppers reined in spending.

The rapidly-declining housing market and banking chaos meant even heavy discounting and price-cutting often failed to tempt more customers.

"Impulse buying is disappearing as people consider purchases carefully and actively seek out promotions," Robertson added.

Food and drink was the only sector showing sales significantly up on a year ago, although the growth was the weakest since March and food price inflation accounted for the lion's share.

Shoppers with tight budgets concentrated on discount ranges with organic products and exotic fruit being replaced by items such as mince and sausages, the BRC said. Clothing sales also worsened despite price cuts and stock clearance of summer goods – with only children's clothing and footwear gaining a minor boost from back-to-school sales.

Autumn clothing also gained a minor fillip from colder weather.

In the BRC's less volatile three-month measure, like-for-like sales fell 1.1 per cent between July and September.

Global Insight chief economist Howard Archer warned that things are only likely to get worse for retailers as the usually busy Christmas period gets nearer.

He said: "The prospects for consumer spending look increasingly bleak as the financial crisis adds to the intense pressures already facing households. This is particularly worrying for retailers as the vital Christmas period draws ever closer."

But he added that the interest rates cut was likely to help consumers.