Retailers predicting gloom on the high street

RETAILERS are braced for a decline in business next year as shoppers scale back spending and struggle to overcome inflationary pressures, research from the British Retail Consortium today shows.

• "Politicians must help them by rowing- back on costly regulation" - Stephen Robertson of BRC. Picture: Julie Bull

Although the recession is now far behind us, two thirds of retailers expect next year to be tougher than 2010 as households also have to contend with public-spending cuts and the VAT rise from January, the BRC's "retail prospects for 2011" survey reveals.

Only 18 per cent of major retailers questioned by the consortium expect an improvement in sales in the new year, indicating the high street is set for another tough ride over the next 12 months.

Despite a last minute rush on Christmas Eve and bumper Boxing Day sales, the BRC is warning sales figures for December - published next month - are likely to reflect the "nightmare" weather which prevented many shoppers from reaching the high street in the crucial run-up to Christmas.

Retailers fear poor December figures will be followed by even tougher trading conditions from 4 January when VAT goes up to 20 per cent from 17.5 per cent.

Stephen Robertson, director general of the BRC, said: "We were expecting the final figures for December spending to be modestly up on last year but we now have to factor in the effects of the nightmare weather.

"Our snapshot shows retailers expect a difficult December to be followed by a tough 2011. They believe the VAT rise will contribute to higher prices and, with fears about government cuts and the wider economy, people will be put off spending."

Although the survey paints a grim picture of retail sales next year, the BRC said many major retailers will continue to create jobs as they play a long-term game.

Almost half of the high street names surveyed said they would continue to invest and either maintain or create jobs. By contrast, 24 per cent warned they were likely to employ fewer people in 2011.

When asked what three things the government could do to ease the pressure on the high street next year, retailers urged policymakers to reduce or relax existing regulations; avoid further regulation; and talk about growth instead of cuts to instil confidence in shoppers.

Robertson said: "The message for government is clear. At a time of public-sector cuts, retailers want to go on delivering the economic growth the country needs. But politicians must help them by rowing- back on costly regulation."

Retailers are hoping that strong Boxing Day sales will make up for much of the lost trade in the run-up to Christmas.

John Lewis yesterday reported that sales in the week to 25 December were up 30.5 per cent year-on-year while it experienced a record start to its online sale at 5pm on Christmas Eve.

Internet sales on Christmas Day also jumped 45 per cent on last year's figures, the retailer said.