Brits set to carry on spending

CONSUMERS will continue spending next year despite higher taxes and government cutbacks, according to a benchmark retail report out today.

The Retail Forecasts 2011 report from BDO predicts that retail sales will grow by 3 per cent during the coming Christmas season, with sales unlikely to drop off next year even after VAT jumps to 20 per cent.

The UK consumer is a "curious beast" that continues to feed its addiction to shopping in the face of an "almost daily barrage of frightening headlines", said BDO.

Its upbeat forecast for next year is supported by its high street sales tracker for October, which despite the government's spending review recorded year-on-year growth of 4.1 per cent at medium-sized retailers.

And while retail spending will come under more pressure in 2011, BDO believes the high street will avoid a "double-dip" recession. However, it warned that retailers would have to work harder to keep their tills ticking over as consumers become increasingly discerning.

The report also predicts at least one "megadeal" in the retail sector, with a major brand such as Argos targeted by investors as confidence grows and larger outfits look to consolidate.

Don Williams, head of retail at BDO, commented: "The UK has one of the most competitive retail markets in the world, and that makes UK retailers very good at what they do.

"We are a nation of shopkeepers catering for a generation of shoppers.

"Companies are coming out of this recession with healthier balance sheets than they did after the last one and are in prime position to invest, be it in M&A activity, new channels or new regions."