Darkening skies over the high street as storm clouds gather

BRITAIN’S beleaguered retailers suffered their worst performance in 16 months in September as nervous households continued to focus on “buying the basics at the best price”.

The CBI’s latest distributive trades survey, which tracks sales volumes, recorded its worst result since May 2010, heightening fears over the UK’s economic performance in the third quarter of the year.

Judith McKenna, chief operating officer of Asda and chair of the CBI distributive trades panel, said consumer confidence remained “bruised” as shoppers are pelted by a combination of high inflation, low wage growth and rising job insecurity.

“Shoppers are still clamping down on discretionary spending and [are] focused on buying the basics at the best price,” she said.

“With the consumer squeeze set to get tighter with the winter utility bills rise, we expect retailers will face a challenging October.”

Although the pace of decline in sales stabilised, the survey, – published yesterday – did little to calm nerves as the storm clouds continue to gather over the high street,

IHS Global Insight economist Howard Archer said: “Although modest, the further deterioration in the CBI distributive trades balance to a 16-month low in September fuels concern that already reluctant shoppers will hold back further on their spending as very low confidence takes a further hit from heightened concerns over the economy, jobs and the financial market turmoil.

“Furthermore, the serious squeeze on consumers’ purchasing power is continuing as they face elevated inflation, muted wage growth and fiscal tightening.”

Computer and video game chain Game was unable to improve the bleak outlook, as it revealed a jump in half-year losses.

Chief executive Ian Shepherd blamed the rise in pre-tax losses ,from £21.5 million to £51.1 million, on a “cyclical low in the industry itself” as new hardware is developed, as well as the wider macro-economic conditions.

“2011 has been a very tough year for the video games industry,” he said. “Like many other retailers, we believe that trading conditions will remain tough for the remainder of the year, and have set our plans accordingly.”

Like-for-like sales dropped by more than 10 per cent during the 36 weeks to 24 September but the group hopes a number of games including FIFA 12 and Call of Duty: Modern Warfare 3 may help turn the situation around during the festive season.

Game traditionally generates 40 per cent of its yearly revenues during the ten weeks running up to Christmas.

Game directors have put their money where their mouth is by agreeing to spend at least 20 per cent of salary and fees to buy shares in the company over the next 12 months. Shepherd said the firm was investing in a number of new developments in the market, including digital, online and cloud-based gaming.