UK high street feels the heat

Published on Saturday 27 September 2008 19:55

IT WAS a rare warm and dry day on two of the most famous shopping streets in the UK. But for the retailers, there was a distinct chill in the air.

Despite the lure of up to 50% off in many stores, on Edinburgh's Princes Street there were none of the usual queues at the tills at lunchtime. In Glasgow's Buchanan Street, the stores were busier but some retailers admitted declining sales.

In the past few days across the UK, the indications of a high street crisis have started to mount. Setting aside the predicament at Bradford & Bingley, curtains and furnishings firm Rosebys went into administration, threatening 2,000 jobs, and MFI, the struggling furniture retailer, was reported to be seeking a new rental deal with its landlords as it seeks emergency funding.

Sales declines at retail chains John Lewis and JJB Sports only added to the misery. John Lewis, seen as a major indicator of industry trends, said sales fell by 5.6% in the week to September 20, while its grocery chain Waitrose saw sales growth grind to a halt.

John Lewis' home division suffered the most, with sales down 14% as the housing market slowdown continues. JJB reported a loss of 9.7m in the six months to July 27, against a profit of 8.3m a year earlier, with sales down in the period and falling further since. Willis Gambier, a furniture supplier to Marks & Spencer and John Lewis, has called in administrators.

There are fears that third-quarter rental bills – due before the end of the month – will put many retailers under pressure and could lead to a further flurry of administrations.

Consumer experts last night warned that shoppers should now be using credit cards, not cash or debit cards, to safeguard their money on big purchases in case the firm behind them goes bust.

And the gloom is spilling on to Scottish high streets. In Edinburgh yesterday, the manager of an upmarket furnishings store admitted he was selling "less furniture and more vases". He added: "People are turning to smaller things to compensate for the bigger things they can't buy."

Manmeet Arora, of Lifestyle Jewellery, Glasgow, said: "There's too much window shopping and not much buying."

Meanwhile, mother of two Sophie Watt, from Glasgow, said the credit crunch had driven her off the high street and on to discount retailers. She added: "I'm now more inclined to go to outlets like TK Maxx."

Martyn Evans, director of the Scottish Consumer Council, yesterday warned shoppers to use credit cards rather than debit cards or cash to put down deposits on large items.

He said: "When firms go bust, consumer credit is the last thing on their list. If consumers pay by credit card it is safe as they will get any amount over 100 back.

"Some banks will refund money paid by debit cards as a goodwill gesture, but the safest thing is a credit card. If you don't, then you might only get a fraction of your money back. It's quite a significant risk. Banks have a lot more clout than individual consumers.

"If you are in a situation where you have paid a cash or cheque deposit for something, you could ask to change it to a credit card or ask for your money back if you are worried about it. However, if a lot of people do this, it could push a company over its credit limit."

He also warned customers to take time to consider major purchases because of the unstable financial situation. "Be very wary about making any commitment to the future because you can't tell what's going to happen with mortgages or bills," he said.

A spokesman for the Scottish Retail Consortium said shops were offering heavy discounts to persuade customers to buy and predicted no change for the foreseeable future.

He said: "Retailers' costs are going up, yet customers are not willing to spend what money they have. So our members are having to offer deep discounting. Supermarkets have launched very high-profile price cuts because they understand their customers are under pressure.

"We are hoping the Bank of England will cut interest rates later this month to give people more money in their pockets. But we always said this was going to be a tough year and there's no reason to believe next year is going to be any different. Retail is a tough industry."

Clive Black, retail analyst at Shore Capital Stockbrokers, said: "The news of what's been happening in the financial markets over the past two weeks has been very worrying for consumers and has impacted their confidence."

He said there would be further "casualties" in the sector. "There will be more companies finding it difficult and the banks aren't in a position to help them as much after the credit crunch, so there will undoubtedly be more casualties."