Around two thirds of retail businesses believe that their Christmas trading will be as strong if not stronger than last year, according to a report published today.
The Christmas Trading Snapshop Survey compiled by the British Retail Consortium (BRC), polled 17 major retailers who represent 51 per cent of the UK retailing turnover and found that 36 per cent of respondents expect their sales to have declined from last year.
Stephen Robertson, BRC Director General, said: “It’s reassuring to see a majority of retailers believe Christmas sales will be at least as good as last year even if a third say they will be worse.
“But, considering inflation is now at 3.2 per cent, growth of anything less then that would be a real-terms fall.”
January’s VAT rise seems to be having an affect on consumer behaviour with 71 per cent of retailers believing that consumer are bringing purchases forward before the change.
A report by Synovate published earlier this month argued that spending had not been significantly spurred on by the impending VAT rise but acknowledged that heavy promotions, especially online, have helped trade.
Robertson added: “Promotions have hit a new level of intensity, retailers believe the next VAT rise is bringing sales forward and Christmas is usually a time when people spend despite their economic worries but ultimately December could prove to be the ninth month in a row of weak year-on-year growth.”
Some predict a significant slowdown in retail trade in 2011, and suggest that rising commodity prices and public sector job cuts are likely to depress consumer confidence.
Jonathan De Mello, Head of Retail Consultancy at CB Richard Ellis, argues that although increased cost pressures and the government’s austerity measures will have the biggest impact on consumer spending next year, there are reasons for optimism.
“Historically low interest rates have ensured disposable income remains relatively high across the country as a whole, given the lower overall consumer mortgage burden - still by far the principal cost most UK households have to bear,” De Mello explained.
“Assuming the government carefully manages the balance between fiscal austerity, inflation and interest rates – which it seems to be doing reasonably well at present - UK consumer spending overall should be relatively well insulated.”