Warning notes sounded for retailers as Christmas looms

Businesses gearing up for the anticipated Christmas rush will be shocked to see Scotland lagging behind the rest of the UK in terms of footfall as shops pin their hopes on a surge of customers leading up to the big day.

Data from the Scottish Retail Consortium (SRC) shows the number of people visiting shops in Scotland dropped by 9 per cent year-on-year in the three months to 31 October, compared with a fall of just 2.3 per cent for the UK as a whole.

Analysts blamed the discrepancy in the figures on lower consumer confidence north of the Border, caused by the heavy reliance on the public sector and looming cuts to the local and national government payrolls.

SRC director Ian Shearer warned: “Scottish consumer confidence is also lower and falling faster than the UK average and retail sales have performed worse than the rest of the UK for most of this year.

“Household budgets are caught between soaring utility and fuel bills and low wage growth, leaving people with less money to spend on other needs and wants.”

Household finances for the UK as a whole have continued to worsen this month, with figures released today by economic data compiler Markit showing the sharpest deterioration in families’ finances for three months.

About 37 per cent of households reported a deterioration in their financial situation since last month, while only 6 per cent noted an improvement.

Tim Moore, senior economist at Markit, said: “The latest gloomy snapshot of UK household finances is all too in keeping with the recent economic news at home and across Europe.

“While all eyes are on whether the UK economy will double-dip, the latest survey is a timely reminder the household recession hasn’t even paused for breath.”

Markit’s data will make for gloomy reading for retailers, who are also being warned not to expect any sales growth over the Christmas period.

Consumer spending is only expected to rise by 0.2 per cent year-on-year at the most – and could even remain flat over the festive period – according to accountants at BDO.

The firm’s 2012 Retail Forecasts report will today warn that companies need to innovate – such as offering “click and collect” services, better internet and mobile phone websites and contactless payment, as used by McDonald’s and Starbucks – in order to attract more customers.

News of the predicted flat-lining in consumer spending comes just days after rival accountancy firm Deloitte warned that retail sales could remain flat over Christmas and not start rising again until 2013.

But BDO said there is cause for optimism next year, with consumer confidence likely to receive a boost from the Queen’s golden jubilee and the London Olympics in the same way as it did from April’s royal wedding.

Some retailers are likely to resort to more traditional discounts and early sales in the run up to Christmas to stimulate waning consumer spending.

Shearer noted: “It’s going to take a major change to tempt shoppers out again. Retailers are running special events and offering early promotions, helping households with seasonal spending as Christmas gets closer.”

Accounts expected to be filed later this week will show that Sir Philip Green, hailed as the “king of the high street”, is not immune to the slowdown in consumer spending.

Profits at Green’s Arcadia Group – which includes high street names Burton, Dorothy Perkins and Topshop – are forecast to have fallen by one-third in the year to 31 August, to about £150 million on the back of £2.7 billion in sales.

The profit is a shadow of the £300m that the group made in 2007, two years after Green paid himself a £1.3bn dividend.