Belfast Telegraph

Retailers at risk as consumers set to slash spending

By Peter Cripps

Cash-strapped UK shoppers will slash nearly £1bn from spending on non-essential goods such as electrical items, furniture and carpets next year, a report has said.

Retail sales are expected to grow by just 1.2% to £295.3bn in 2012 - their third slowest year of growth in the past four decades - spelling more pain for the sector, according to a report by leading retail research firm Verdict.

Food is expected to be the best-performing sector next year, but the UK's biggest retailer, Tesco, will be "the most challenged grocer" as rivals up their competition by opening more branches, according to the report.

Sales of groceries will grow by 3.3% as consumers eat more meals at home to save money, but spending on non-food items is set to shrink by about 0.5% as the change in attitudes "from extravagant to austere" continues.

That would mean retail non-food sales will have fallen by £9.5bn since the recession of 2008.

Electricals, furniture, floor coverings, DIY and gardening goods will be hardest hit, with sales down by about £900m, and are unlikely to improve until mid-2013. Clothing and footwear will grow by just 2.4%, or £14 extra per person, as a result of higher prices, but the rise in youth unemployment will hit fashion retailers.

The report, compiled in conjunction with business analysis firm SAS, will add to fears that major retailers are in danger of collapsing in coming weeks amid unprecedented levels of price reductions.

It warns that the first three months of 2012 will be the most difficult period for retailers, as consumers tighten their spending after the expensive Christmas period.

Verdict retail analyst Maureen Hinton said: "Conditions will ease slightly with events such as Easter, the Diamond Jubilee and the Olympics improving consumer sentiment, but overall confidence will still be low.

"Real improvement and growth are only likely from October onwards when, as long as the weather is seasonably cold, consumer will be driven to buy seasonal essentials before the end of the winter retail season in December and get back into the Christmas spirit."

The 1.2% growth would be the third lowest rate in the past 40 years.

The only worse years were 2011, which is expected to have seen growth of just 0.9%, while there was a 0.4% fall in 2009.

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