Empty high streets as retailers struggle

HIGH street sales fell for a second consecutive month in September, adding to fears that the UK economy is once again on the downward slide, writes Nathalie Thomas.

Official figures yesterday revealed a weaker-than-expected 0.2 per cent drop in sales volumes last month, dealing a blow to coalition government hopes that private sector growth will fill the gap left by forthcoming public spending cuts.

Although the value of sales rose by 0.3 per cent compared to August, economists warned the recovery was already past its peak.

David Kern, chief economist at the British Chambers of Commerce, said: "These figures support our assessment that there will be a significant slowdown in the rate of growth in the third quarter of the year, although GDP will still remain positive."

There was one bright spot yesterday in the form of improved business lending figures.

Lending to corporates rose for the first time in six months during August, a Bank of England report showed.

But the growth is likely to be short-lived with preliminary data for September suggesting the increase has not been sustained. The bank's report read: "In recent discussions, some major lenders reported that businesses were continuing to pay down debt as they reduced leverage and improved working capital management.

"Data from the major UK lenders indicated that net lending to businesses weakened in September."

Howard Archer, chief economist at IHS Global Insight, said: "The overall tone of the report does little to dilute concerns that persistent tight credit conditions continue to pose a serious handicap to economic activity."