London's shops hit by the worst slump since 7/7 attacks

West End stores have suffered their biggest slump in sales since the aftermath of the July 2005 terror attacks.

Shop takings last month were 5.9 per cent down on a year ago, raising fears that central London faces a tough Christmas as unemployment worsens.

The swine flu scare and hotter weather than last year were two factors blamed for the end-of-summer "stay-away". The June and July sales may also have contributed as bargain-hunters failed to return in August.

The downturn is much more severe than during last autumn's financial crisis and comes after figures showing that shoppers are prioritising debt reduction over spending for the first time since the mid-Nineties.

Clothing, footwear and household goods saw the biggest sales falls, while homewares and furniture were generally strong. Food sales also held up.

The capital's like-for-like sales plunge is far worse than the 0.18 per cent average for the UK. As well as stores, London's restaurants also had a very quiet August. The British Retail Consortium said the plunge in business was partly down to a recovery in the pound's value, eroding London's appeal as Europe's bargain capital. The recession played a part in making domestic shoppers reluctant to spend.

People who shopped for light clothes in June's heatwave and warmer ones in July's downpours also contributed to the slump, as they felt they did not need to buy more later, according to the BRC.

After the July 2005 bombings, London shop sales fell 8.9 per cent from the same period the year before. Since then the West End has generally done better than the rest of the country.

Oxford Street stores told the Standard that though consumer confidence was picking up, people were window-shopping instead of buying products.

Some high street stores also claimed poor sales in household goods were a result of fewer people moving during the recession. The BRC's director general Stephen Robertson said: "These results don't suggest the recovery is under way. It is the lowest sales growth since August 2005.

"This looks like a dramatic drop but it's compared with a strong August 2008 - the third highest figure last year. The rest of the UK saw poorer growth last August, so a better result now."

Statistics out on Wednesday are expected to reveal unemployment is still rising sharply, with a jump of more than 200,000. It means unemployment still looks likely to reach threemillion next year and could go higher.

Jace Tyrrell, of the New West End Company representing re- tailers around Oxford Street, stressed the figures were London-wide, not just for the West End. He said: "At a recent meeting people said things are picking up and September is our busiest month after December.

"We expect Christmas to be a specially big one and are making a huge effort to target the US market, which is why we are in New York with Boris Johnson this week promoting London."