If you wandered around the High Street this weekend, it was tempting to ask: credit crunch, what credit crunch? – it seems the precincts and malls were brimming over with shoppers.
The trouble is, how many of these shoppers were actually buying anything? Well, it will be a few weeks before we find out. It seems likely that MFI and Woolworths will not be the only casualties seen. The real crunch might be by the end of March, when the next quarterly rent is due for payment.
But so much for the evidence of our eyes, what are the surveys saying? Friday saw the latest distributive trades index from the CBI. This is one of the big three retail reports. The ONS report is the most comprehensive, and yet constantly seems to present data that was better than we were expecting. The British Retail Consortium and CBI, however, have been reporting findings which are a lot more in line with what you might expect.
Alas, it was not good news from the CBI. “High street sales fell more sharply than feared, and retailers expect the Christmas shopping period will be especially slow,” said the employers organisation.
Just 16 per cent of firms who replied to the CBI survey said that sales were higher in the first half of November compared with a year ago, while 62 per cent said they were lower. So that is a balance of minus 46. This is the joint worst score seen during this slowdown – equalling the index in August.
The only ray of hope really rests in that the CBI survey covered the period from 28 October to 12 November, so it missed the high profile sales – especially the Marks and Spencer one-day sale. So there is reason to hope sales will have picked up later in the month.
But looking forward, the picture is not very nice. A balance of 37 per cent expect the retail business situation to deteriorate over the next three months. This has crushed investment intentions, where a net 57 per cent of firms plan to cut expenditure, which is the weakest figure since the survey began in 1983.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said: “Christmas is going to be extremely tough this year, with retailers having to work harder than ever to keep the tills ringing. The added pressure of changing millions of prices, to reflect the cut in VAT, will be an unwelcome and costly burden. Big ticket items like consumer durables, furniture, carpets and DIY, are really being hit, and with a thawing of the housing market remote, this is unlikely to change. Lower petrol prices and recent cuts in interest rates should help put a little more into people’s pockets, as will the VAT cut, but only if retailers pass it on before Christmas.”
And so now we wait for the next BRC survey.
The real snag, though, with the High Street, and it’s a problem that politicians and economists have not really acknowledged, is that it has become too large. The sector has reached a scale that can not be sustained. Only if we continue to spend more money than we have got, can the High Street see its boom continue.
An adjustment has to occur. This is unavoidable, and no attempt by the government to try and boost expenditure by tweaking with VAT, can alter this fact.
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