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Oct 5, 2011
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Eighteen more months of gloom ahead for UK retail

By
Reuters
Published
Oct 5, 2011

MANCHESTER, England | Wed Oct 5, 2011 - More British retailers will go bust in the coming months, others are likely to shed jobs and sales look set for a prolonged slump, the head of the British Retail Consortium told Reuters on Tuesday, warning of 18 months of hard times for the high street.


Stephen Robertson, who represents many of Britain's biggest retailers, said consumer morale was heading towards levels not seen since the collapse of U.S. investment bank Lehman Brothers despite near-unprecedented levels of discounting in shops.

"We are going into an extended period where we are going to be under huge pressure," Robertson said in an interview at the ruling Conservative Party's annual conference in the northern city of Manchester.

"The next six months are going to be characterised by very low levels of growth. I think we've probably got another 18 months of real challenge," he said.

The Conservative-Liberal Democrat coalition government is looking to the private sector to ignite the stalling economy while ministers slash billions of pounds in spending and hundreds of thousands jobs in the public sector over the next four years to tackle a record budget deficit.

There has been little sign so far that the private sector will expand rapidly enough to offset a shrinking state - Britain's economy has hardly grown for the last three quarters.

Robertson said the government needed to do more to help businesses take up the slack.

"It's imperative the government doesn't put us under extra pressure through regulation and business rate hikes," he said.

"We are trying very hard not to demand any special favours and trying very hard to make sure we soak up unemployment. For goodness sake, recognise who your friends are."

MORE FIRMS TO FAIL

Several big retailers have already gone out of business since the global credit crunch. Last week, fashion retailer Alexon, which owned Ann Harvey stores and employed 2,700 staff, was the latest to fall.

"The underlying costs for businesses will continue to increase, therefore squeezing margins and I think some businesses will inevitably at some point fail," Robertson said.

The BRC, which publishes a closely-watched monthly retail sales monitor, reported a fall in like for like sales in August of 0.6 percent, leaving sales for the year to date at zero. Robertson said he did not expect a "bumper Christmas" to come to the rescue this year.

"If you look at the number of businesses who have reduced their number of stores, or issued profit warnings and a few casualties who have their doors forever in retail, there is no doubt that retail is finding life extremely difficult," he said.

He said commodity price inflation was still likely to "underpin pound note increases - or sales value increases - but beneath that we may well see the volumes of food (sales) going backwards."

"If you link that back to jobs, if you're an operator, food or not food, and you have shrinking volumes, then you begin to wonder if you can afford all the folk that you employ," he said.

The BRC has been lobbying government to scrap the link between business rate increases and the September retail price inflation figure and to replace it with a peg to consumer price inflation smoothed out over 12 months.

"They have been listening," Robertson said.

He also urged the coalition to fulfil its promise to reduce red tape. Ministers have said they will only approve a new regulation if an old one is scrapped to make room.

"Let's start delivering and delivering with much more urgency," he said. "One in one out is a pretty miserable ambition. Let's see one in five out."

(Reporting by Matt Falloon; editing by Ron Askew)

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