Figures signal that downturn will continue into new year as official data is expected to show economy contracted at the end of 2012
Fears that Britain’s economy has started the new year badly have gained further credence after a survey confirmed an ongoing slowdown in high street sales growth.
The CBI’s first monthly distributive trades survey of 2013, which covers the first fortnight of January, shows 41% of retailers reported increased sales volumes compared to a year ago and 24% reported a fall. The resulting balance of +17%, although better than expected, shows a dramatic change from October and November last year, which recorded balances of +30% and +33% respectively. Only buoyant grocery sales kept the index from falling further, said the CBI.
Published the day before official figures are expected to show the economy contracted in the final quarter of 2012, the CBI survey is a warning that any downturn will continue into the new year.
The Office for National Statistics is expected to say on Friday that GDP declined between October and December after a post-Olympics boost in the previous three months when growth registered 0.9%. The UK economy has failed to grow for the last two-and-a-half years.
ONS pay figures on Wednesday showed annual pay increasing by just 1.4% at a time when inflation is 2.7%, leading many economists to predict widescale bankruptcies among high street retailers in addition to recent victims HMV, Comet and Jessops.
More than a quarter of small and medium-sized retailers consider themselves at high risk of going out of business within the next yea, according to the latest quarterly SME Risk Index from insurer Zurich.
The gloomy outlook reflects a consistent view among SMEs questioned, with over three-quarters of them (79%) continuing to raise concerns about the current economic climate, and 82% not confident it will improve in the next quarter.
The CBI said its survey found that while sales volumes in January were broadly in line with the average for the time of year, retailers expect sales to dip below seasonal norms once again in February (-7%) and are predicting year-on-year sales growth to slow slightly further in the next month.
Judith McKenna, chair of the CBI distributive trades panel and Asda chief operating officer, said: “Despite mixed news from the high street over the last few weeks, strong sales growth in the grocery sector has added a touch of sparkle to overall retail sales. However, we are far from out of the woods. With tough trading conditions and subdued consumer spending adding to the uncertain economic picture, retailers will continue to face tough market conditions in the coming months.”