Apr 20, 2010
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UK retailers ease fears of double-dip recession

Apr 20, 2010

By Mark Potter and James Davey

LONDON (Reuters) - Retailers are showing growing confidence about an economic recovery, easing fears that uncertainty over a national election on May 6 and the prospect of higher taxes to cut government debt could hit consumers.

The optimism, spanning discount fashion chain Primark (ABF.L), luxury goods label Burberry (BRBY.L) and the country's biggest store group, Tesco (TSCO.L), comes in a week when the economy moves centre stage in the election battle.

Unemployment figures on Wednesday 21 April are expected to show a smaller increase in March than in February, while retail sales data on Thursday 22 April will confirm the strength of consumer spending. First-quarter GDP numbers on Friday 23 April will show whether the economy is clearly emerging from a deep recession.

"The recovery has taken hold -- strongly on a worldwide basis...and slower but steady in the UK. There won't be a double dip (recession)," Tesco Chief Executive Terry Leahy told Reuters on Tuesday 20 April.

Hit by its exposure to the financial services industry which lay at the heart of the global downturn, Britain has taken longer to emerge from recession than other major economies, piling pressure on Prime Minister Gordon Brown whose Labour Party is trailing in opinion polls.

Some retailers, like clothing groups Next (NXT.L) and Marks & Spencer (MKS.L), have warned the economy could continue to struggle as a new government tackles record high borrowing.

Such fears, however, have not so far held back demand for luxury raincoats and handbags from Burberry, which cited Britain as a standout performer in recent trading.

"To our mind the election isn't going to be a major factor in our growth projection for 2010/11," Chief Financial Officer Stacey Cartwright told reporters, pointing out that the UK represents less than 7 percent of group sales, with a large part of that number fuelled by high-spending tourists.

Associated British Foods (ABF.L), which owns Primark fashion stores and food products like Silver Spoon Sugar and Twinings tea, said Britain's economic recovery was slower than elsewhere, but nonetheless underway.

"The UK is showing signs of consumers trading up," Chief Executive George Weston told Reuters.

Its 196-strong Primark chain showed like-for-like sales up 8 percent in its half year to late February.

Its shares rose 5.3 percent by 2:45 p.m..

Online fashion group ASOS (ASOS.L) was also upbeat.

"Our girls are still spending, they're all over the Internet. If their parents are in employment they've still got money to spend," Chief Executive Nick Robertson told Reuters.

"Our last eight weeks sales figures are enough to say we can ride this out."

Its shares gained 5.7 percent.

It was not all good news, however.

Chocolate maker Thorntons (THT.L) issued a profit warning, blaming unhelpful weather and a poor Easter. It said cash-strapped shoppers were likely to stay "focussed on value" and hold back from treating themselves.

Its shares dropped 11.2 percent.

(Additional reporting by David Jones and Simon Jessop; Editing by Michael Shields)

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