A challenging Christmas for the high street

Analysts are predicting a challenging Christmas after a flurry of profit warnings from struggling retailers. Latest figures show that the long anticipated slowdown in consumer spending is finally underway.

Shoppers are expected to abandon the High Street after rising interest rates, record levels of debt and mortgage repayments take its toll and consumers are wary during the countdown to Christmas according to Lisa Dillon of retail at Ernst & Young.

For the first time in 9 months, UK retail sales fell in October, down 0.1% on September. This was worse than anticipated and a clear indication that higher interest rates and the credit squeeze are having an impact.

September’s 0.6% rise was revised down to 0.3%, taking the annual rate of growth from 6% to 4.4%. The latest figures from the Office for National Statistics will lead to further pleas for the Bank of England to cut interest rates. Mervyn King, the Bank of England’s Governor, has hinted that we can expect at least 2 interest rate cuts in 2008. Several economists expect the first as early as February.

It is expected that food retailers will probably survive the worst but electrical retailers and DIY stores and are expected to be hit.

Ms Dillon continued that further profit warnings are expected as belts will be tightened. The weaker retailers are likely to emerge into the New Year bruised and battered. It is expected that retailers will bring forward sales and offer large discounts.

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