Scott Reid: ‘Technology will make or break HMV this Christmas’

The group will reveal whether its new technology stores helped put it on the road to recovery ahead of the key festive period.

The retailer is fighting for survival amid a slump in demand for CDs and DVDs but has pinned its survival hopes on a new store format that dedicates a quarter of its space to selling iPods, tablet computers and headphones.

Independent retail analyst Nick Bubb said: “They have got to somehow make a success of this new format, otherwise they are sunk.

“Technology will make or break HMV this Christmas. HMV is already the number one seller of headphones, so it could just work.”

He expects the group to report a 19 per cent increase in first-half pre-tax losses to £38 million – a period that is normally loss-making for the group – and warned it is now in danger of failing to break even in the full year.

With the UK’s economy on the brink of recession, Chancellor George Osborne’s deficit- reduction targets are expected to come under further strain on Wednesday.

The Office for Budget Responsibility last month raised the government’s full-year borrowing target from £122 billion to £127bn.

Although this is still £10bn less than the previous year, the OBR moved the goalposts as it downgraded its predictions for UK economic growth.

The faltering state of the economy means the government’s tax revenues are likely to be hit at the same time as it is saddled with a bigger bill for benefits payments.

In the financial year to date, the government’s deficit has been broadly on course to hit its previous £122bn target.

The most recent figures, for October, saw public sector borrowing, excluding financial interventions such as bank bail-outs, fall to £6.5bn, which was £1.2bn lower than the previous year and left borrowing in the year since April at £68.3bn.

Figures released for November on Wednesday are expected to show that the deficit is still falling – but at a slightly slower rate than previously.

Philip Shaw, an economist at Investec, predicts the figure will come in at £19.8bn, modestly below the £20.5bn in the previous year.

High petrol prices forcing people from their cars onto public transport are expected to have boosted sales at transport group National Express.

The group, which runs the c2c and East Anglia rail services between London and Essex as well as bus and coach services, is set to reveal that revenues in the final quarter of 2011 continued to benefit from the resilience of public transport and from higher train fares.

Train operators increased fares by an average of 6.2 per cent in January but passenger numbers are expected to have held firm as a result of an even greater rise in the cost of filling up a car, with commuter routes being boosted on weekends as families use the rail network for sightseeing.

Analysts will be looking out for whether the rail business has continued its recent strong growth or if rising unemployment levels have begun to hit demand from commuters.

Rising petrol prices are also expected to have boosted its bus business, which operates more than 1,600 vehicles.