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Fears grow for high street sales

News, 08 April 2015

LONDON: Even though UK consumer confidence hit a 12-year high in March, there is growing concern among some analysts and senior retail executives that consumers are eschewing high street shops to spend their money elsewhere.

"Although the consumer has more money, they are spending it very judiciously," said Clive Black, an analyst at Shore Capital, in comments to the Financial Times.

UK retail sales grew 5.7% year-on-year in February, according to official statistics, but the volume and value of food sales have been flat over the past three months while clothing sales have also been weak.

With the economy growing and consumer sentiment high, retail executives suggested British consumers appear to be choosing to spend on leisure and big ticket items that they had to do without during the economic downturn.

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"I think consumers have decided to save a bit more than before, or maybe they decided to take the kids to the cinema, rather than go and spend more in a supermarket or another retailer," said Andy Clarke, chief executive of Asda, one of the UK's "Big Four" supermarkets.

Marc Bolland, chief executive of Marks and Spencer, said: "[Consumers] have more disposable income that they would like to spend. What they certainly prioritise are things like holidays, weekends out and technology like new iPhones."

Clive Black agreed, noting that where consumers are increasing their spending, they are increasing their spend more on services than goods.

Consumers are widening their lifestyles, added fellow analyst Richard Hyman, who said they are now choosing to spend their money on travel, leisure, eating out, private healthcare and education.

Reinforcing their comments, the latest BDO High Street Sales Tracker has shown that high street sales in March suffered their biggest fall in more than three years.

Released just before the Easter holiday, the BDO report showed like-for-like sales fell by 4% compared with a year ago, making it the sharpest monthly drop since September 2011.

Sophie Bevan, head of retail and wholesale at BDO, said: "We know consumers have money to spend, but these figures show they won't commit unless they feel the product and the price is right."

Data sourced from Financial Times, BBC, Reuters, Telegraph; additional content by Warc staff