High street sales at £9,000 a second – but 'worst ever' Christmas looms

Published on Thursday 20 November 2008 22:29

"Conditions remain tough and look set to get tougher"

HIGH street sales have defied predictions of a pre-Christmas slump, with 5.3 billion a week being taken at the tills, new figures showed yesterday.

The number of transactions in October was down just 0.1 per cent compared to the previous month and up 1.9 per cent on a year ago, according to the Office for National Statistics. The value of sales was up 3.2 per cent year-on-year.

The surprise findings came despite a looming recession and concern that shoppers were feeling the pinch, prompting major retailers such as Marks & Spencer, John Lewis and Debenhams to hold snap sales.

Experts, who had predicted a 0.9 per cent fall in sales, said the headline figure masked disparities under the surface. Between September and October, the number of food purchases increased by 1 per cent, while non-food sales fell by 1.1 per cent.

Debenhams insisted that the sector was facing "the worst Christmas we have ever had", while the British Retail Consortium said the figures failed to convey how tough conditions were for shoppers and traders.

Stephen Robertson, director general of the British Retail Consortium, said: "These unexpectedly strong ONS figures suggest sales growth increasing in stark contrast to our own showing total sales actually falling in October. Given customers and retailers are being squeezed by a whole range of costs and consumer confidence at record lows, few retailers are telling me consumers are spending more.

"Conditions remain tough and look set to get tougher into the new year, which can only make customers more nervous about spending."

The figures came as more than 31 billion was wiped off the value of shares in London as the FTSE 100 sank 3.3 per cent. There were also losses on Wall Street and heavy falls in Asia, with Hong Kong's Hang Seng down 4 per cent and Japan's Nikkei falling almost 7 per cent.

Oil sank below $50 a barrel – a three-and-a-half year low – but recovered to $51.64.

Meanwhile, separate ONS figures published yesterday showed that the UK government's finances were worsening, with net debt since April now totalling 37 billion – just 6 billion short of the 43 billion predicted for the entire financial year.

Alistair Darling, the Chancellor, will issue revised borrowing predictions in his Pre-Budget Report on Monday. With the UK due to fall into recession in the new year, the net deficit is expected to hit 65 billion by April.

Mr Darling and the Prime Minister, Gordon Brown, have made clear that they will back a "fiscal stimulus" – a combination of tax cuts and extra government borrowing for infrastructure projects such as house- and road-building – to aid efforts to get the economy back on track.

With UK unemployment rising to 1.8 million and fears that three million could be out of work by 2010, Employment Minister Tony McNulty yesterday said he was reviewing plans to close Jobcentres. Around 2,000 temporary Jobcentre staff would also be retained, he said.

This follows a Liberal Democrat campaign to highlight the number of Jobcentre closures – more than 500 since 2002, 50 of them in Scotland. The Lib Dems blamed the closures for a 110 per cent rise last year in the number of Scots waiting to have claims for jobseekers' allowance processed. Some 4.7 per cent of Scots are unemployed, with 85,400 claiming the benefit.

Vince Cable, the Lib Dem shadow chancellor, warned that government efforts to kick-start the economy with a reported 18 billion fiscal stimulus would amount to nothing if major banks such as Barclays decided to trim their lending by around 10 per cent.

He said the Chancellor's efforts risked being "dwarfed" unless the government managed to unblock bank lending. He said the nightmare scenario was that further banking debts would be discovered, forcing the government to pump in more money to stabilise the system. This could spiral into the government having to print money.

He said the government was sending mixed messages to the banks by asking them to repay Treasury loans yet continue lending to small businesses.

"The priorities at the moment are to keep lending," he said. "If they don't and the economy implodes, there are more bad debts and the government will need to lend more."