UK Consumers' Fears Hits Retail Sales

19 February 2007

LONDON: Retail sales in the UK have been hard hit by three interest rate rises in six months - with the prospect of more to come. The Office for National Statistics data for January, released Friday, show headline numbers for retail sales were 1.8% lower than in December.

This is the biggest monthly fall in four years. When large discounts offered by stores are taken into account, the actual value of goods sold slipped a significant 33.7% between December and January and highlights how retailers' margins have suffered.

A gloomy Malcolm Pinkerton from the British Retail Consortium comments: "This paints a dire picture . . . It's clear that the interest rate rises are now affecting the consumer. It's quite a concern, and suggests the rest of the year could also be very tough for retailers."

The new year hangover among shoppers has taken economists by surprise because previous surveys from the Confederation of British Industry and the BRC had suggested January had been a robust trading period.

Worst affected were household goods retailers and clothing stores, which respectively saw sales fall by 4.2% and 4.4%.

Says Vicky Redwood of Capital Economics: "The sharp fall in retail sales in January put a serious dent in the view that the crucial Christmas/New Year period had been a pretty good one for retailers."

Despite the gloom in UK high streets, internet retailers performed strongly. The ONS figures showed sales in the non-store retailing and repair category were up a record 17.7% on the year in January.

Data sourced from; additional content by WARC staff