First fall in shop sales for nearly 40 years

THE annual value of High Street sales has fallen for the first time in almost 40 years, raising fears for the future of more big name stores. Retail sales were running at £4.6bn a week in April, down by 0.1% on the same month last year. This represents the first annual fall in cash terms since May 1967.

The gloomy figures, published by the Office of National Statistics, confirm earlier studies by the CBI and the British Retail Consortium.

Boots revealed yesterday that profits fell 11% last year to £481m as it battles competition from the major supermarkets. Sales at the clothing chain Next were down more than 3% in the first few months of the year.

Retailers are slashing prices to encourage shoppers through the doors. However it is clear that families are tightening their belts as they suffer the effects of higher interest rates and household bills.

The fall in the value of sales was greatest among non-food stores, particularly those selling household goods, such as electrical items, furniture and carpets. The slowdown has serious implications for the entire economy, for stores may well cut jobs and manufacturers are seeing a fall in orders.

HSBC economist John Butler said: 'Our concern is that spending has slowed sharply despite a background of higher employment, reasonable income growth, high consumer confidence and wealth and low interest rates.'

A CBI survey of small manufacturers reported that 39% saw a fall in orders over the last three months, compared with 20% who had an increase. The CBI's Hugh Morgan Williams said: 'Confidence is low with domestic and export orders falling. Small and medium enterprises are employing fewer people and staff levels are expected to fall further over the next three months.'

Some major players in the High Street have already gone to the wall. Allders employed 7,500 people in its 45 branches. But after 143 years of trading it collapsed in January with debts of £15m and a massive pension deficit.

Retail entrepreneur Harold Tillman saved the Allders name after buying the group's flagship store, in Croydon. The deal was signed this month for an undisclosed sum, saving 500 jobs.

Another casualty was the furniture chain Courts, which racked up outstanding debts of £125m even after its assets were sold. The gloom among retailers appears to be a direct effect of the slowdown in the housing market.

Nationwide, the biggest building society, believes the property market will stagnate by the end of the year. Previously it had forecast a 2% rise in house prices by the end of the year. This figure has now been revised to between 0% and 2%.

The society said it believed there would be a 'soft landing' for the housing market. It reported net mortgage lending had fallen to £10.9bn in the year to 4 April against £13.2bn last time.