Fears of High Street recession

Jonathan Prynn, Business Editor @JonPrynn|Consumer Affairs Editor|Evening Standard

13 April 2012

FEARS for Britain's stumbling economy are set to increase this week. Days after the General Election, retailers are expected to reveal that sales slumped last month.

The figures will dash the Government's hopes of a spring recovery on the High Street and heighten City alarm that the economy is in real trouble.

The warning bells will be enough to persuade the Bank of England to keep interest rates on hold at 4.75% today, economists believe.

The figures, from the British Retail Consortium (BRC), will show like-for-like sales down by as much as 3% compared with April last year. Although this is distorted by the early Easter, they also follow weak sales figures for March, suggesting the April numbers are more than a blip.

It completes the most miserable six months for the High Street for at least a decade. The great consumer slowdown started last autumn after the latest interest rate rise and continued through Christmas and New Year sales.

During that time there has been a slew of profit warnings and poor results from big high street names including Marks & Spencer, French Connection, HMV and JJB Sports.

In a fresh blow, a report out today suggests consumers are tightening their belts after the unprecedented borrowing and spending booms of recent years. Forecasting group Experian Business Strategies said: 'People are more cautious about taking on further credit and a cooler housing market is depressing sales of household goods. We expect slower consumer spending growth and retailers of durable goods in particular will face a harder year.'

Retailers said it was time for the Bank of England to ease the pressure by slashing rates today. Kevin Hawkins, director-general of the BRC, said: 'What we want to see is a definite signal that the interest rate cycle has turned.'

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The looming sense of disaster has been heightened by the collapse of MG Rover and the financial crisis at Marconi. Consumers have been unsettled by five rises in borrowing costs since November 2003 and the halt in the property market.

There has also been talk of further interest rate rises to counter the inflationary impact of record oil prices. At least one respected City economist, John Butler of HSBC, believes there is risk of recession on the High Street. Many others believe the Bank will have to cut rates to kick-start the economy.

However, Richard Hyman, chairman of retail consultant Verdict, said: 'No one is claiming retail sales are going like a train but neither are they falling through the floor.'

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