Retailers 'face tough time' as consumers cut back

Christmas sales may not be enough to save some retailers, claims the report

The UK retail sector faces another tough year in 2012 as consumers continue to cut back, according to a report by Verdict Research.

It claims consumer spending will grow by 1.2% next year, the third slowest rate in 40 years.

Food sales are expected to rise strongly, the report claims, as more consumers will cut back on going out.

It comes as insolvency firm Begbies Traynor predicted that the retail sector would struggle most in 2012.

Maureen Hinton of Verdict said: "The first three months of 2012 will be the most difficult period for retailers as consumers cut back severely after the expensive Christmas period.

"Conditions will ease slightly with events such as Easter, the Diamond Jubilee and the Olympics improving consumer sentiment, but overall confidence will still be low."

Gloomy outlook

Begbies Traynor's Red Flag Survey claims the sectors most at risk in 2012 are retail, travel, leisure, property and construction and manufacturing.

Ishfaq Anwar: "Worst Christmas trading in 22 years"

"Profit warnings from big High Street names are only the tip of the iceberg," according to Julie Palmer, a partner at Begbies Traynor.

"Beneath the large retail chains there is a raft of small to medium sized retailers that are struggling to maintain their businesses and don't have the resources to turn things around - they will be the companies more likely to fail in 2012."

Analysts Experian say the predicted £10bn plus spend for the whole of this week will be 2011's most lucrative for retailers, beating the pre-Christmas rush.

Consumers are expected to have spent at least £22.8bn by the third week of January.

High Street struggles

However, in Slough, retailers have told a different story about Christmas trading.

Ravi Hansra, owner of AB Superstores in Slough High Street said: "You can now go into lots of shops and buy Christmas decorations - we used to sell pallets and pallets of wrapping paper; now it's a pallet.

"Our daily pre-Christmas takings were down 15% a day compared with last year.

"I think trading will be a struggle for the foreseeable future - I don't see the High Street being around in 20 years' time."

"Ten years ago, people would walk to wherever was convenient to do their shopping - now they drive to wherever's convenient.

Ishfaq Anwar, 48, is owner of clothes shop Denim & Hide in Slough's town centre.

"We've just had the worst Christmas in 22 years of trading.

"We sell a lot of designer names - Armani, Polo Ralph Lauren, Hugo Boss - but people are just looking, not buying.

"About 60 to 70% of people who came in before Christmas were asking: "When does your sale start?"

"It has been a real struggle this last two years - the shopping centre next door had a big HMV store which was a draw for lots of people, but that closed down.

"I remember trading through the last recession, but this time things are different as everyone is affected."

'Manic' Christmas

However, some consumers in Slough told a very different story.

Sophie Flynn, 19, works for a large department store in Slough.

She said: "I did try and work out a budget this year but I didn't stick to it.

"I saw some things and simply got them because I know people would like them.

"The shop where I work has been absolutely manic - we haven't seen any sign of the consumer slowdown before or after Christmas."

Michael Page, 25, is a telecoms buyer who lives in Reading and works in Slough.

"I didn't think any differently in terms of spending, in fact, I probably spent more this year as my financial circumstances have improved.

"I know times are tougher and things like food and petrol are more expensive, but people still want their families to have a great Christmas despite the gloom."

For Rizwan Ahmad, 28, a factory worker, planning has been the key to affording a good Christmas.

He and his wife have three children under the age of eight.

He said: "We probably spent between £1,500 and £2,000 this year, but we planned things as we knew things were going to go up in price.

"We know things are difficult for people and we wanted the kids to enjoy Christmas.

"We didn't spend any less this year than in 2010 - but we have seen prices go up this year."