Bleak winter for retailers

Britain’s retail sector will experience an accelerated rate of decline in the first quarter of 2008, a group of industry experts have predicted.

Senior retailers from the KPMG/SPSL Retail Think Tank (RTT) believe demand will deliver the worst negative impact on the sector’s health in the first three months of the year.

They say like-for-like sales at market level are also expected to be negative and warn any expected interest rate cut will not have a short-term impact on consumer attitudes.

Their pessimistic outlook follows disappointing December sales which, according to the Office for National Statistics (ONS), were actually lower than those experienced in November.

Yesterday the ONS confirmed fourth-quarter gross economic product (GDP) growth slowed 0.1 per cent to 2.6 per cent. The RTT said the final three months of 2008 saw demand, margins and costs all have a negative impact for the first time since it began work in mid-2006.

Helen Dickinson of KPMG said: “The tough year in 2007 looks set to become even harder in 2008.

“The RTT is predicting difficult conditions ahead with a further weakening of demand growth, erosion in margins and cost inflation outstripping top-line growth.

“Demand is the most influential variable, so with the RTT stating that this driver is experiencing the most pressure, the first quarter of 2008 looks set to be challenging, particularly in the non-food sector.”