UK retailers hit by March fall in high street sales

There was no respite for British retailers last month after an unexpected fall in high street sales added to mounting fears that the UK is in the grip of a consumer slowdown.

Official figures showed that retail sales slid 0.1 per cent in March, compared with the previous month, pushing the annual rate of growth to its lowest level since August 2003, at 2.7 per cent.

The fall wrong-footed economists, who had predicted a 0.4 per cent increase, dashing expectations that interest rates might rise next month.

Peter Dixon, at Commerzbank, said: "Clearly, the consumer has backed off. The data today said there is no room for the Bank of England to raise interest rates despite the fact that inflation is at a seven-year high."

The pound suffered its biggest drop in two weeks against the euro, sliding to 68.53p.

The Bank of England has said a consumer slowdown is the main risk to its inflation and growth forecasts for this year.

The decline in retail sales was driven by a weak contribution from household goods stores, suggesting consumers have responded to the housing slowdown by giving up do-it-yourself jobs.

Consumers may also have been put off dipping into their wallets by fewer bargains, as retailers tried to put their prices up to compensate for the drop in sales, data from the Office for National Statistics showed.

WH Smith yesterday became the latest retailer to warn that conditions on the high street were "tough".

Boots and Jessops have issued profits warnings and underlying sales have fallen at Argos, which is owned by GUS, for the first time in six years.

Non-food sales fell 0.6 per cent in the three months to March against the previous three months.

The other weak areas were internet and catalogue mail-order sales, which tumbled 3.9 per cent - their biggest monthly drop since January 2003.

Paul Clarke, the national retail director for Barclays Business Banking, said: "The traditional Easter bounce has failed to materialise and retailers remain very cautious about the sector's outlook.

"Current trading conditions are difficult as footfall continues to be subdued and consumer behaviour has been tempted by a static housing market."

- INDEPENDENT