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31 July 2012 10:30
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High street retailers reported a greater-than-expected slowdown in sales growth this month, the CBI said, amid poor weather and weak consumer confidence.
A balance of 11% of retailers said sales volumes were higher than a year ago this month, which was a weaker reading than companies had predicted in June.
Businesses also reported higher orders in July, with a balance of 5% reporting growth but, again, this was lower than anticipated, the CBI said.
Judith McKenna, chair of the CBI Distributive Trades Panel and Asda's chief operating officer, said: "With consumer confidence weak and wage growth remaining sluggish, the longer-term outlook for retailers remains challenging."
The survey results were published as a PricewaterhouseCoopers (PwC) study showed an increase in the number of insolvencies among retailers – rising to 426 in the second quarter, up from 386 the previous year.
Looking ahead, retailers expect both sales and orders growth to slow down further, the CBI said, with both expected to be effectively flat on a year ago in August.
Furniture, clothing and food sales all saw growth but at a slower rate than June, the CBI added.
Chris Wilson, economist at financial information services firm Markit, said: "Firms are perhaps adjusting to the reality that sales will remain depressed due to the combination of low demand for seasonal ranges due to the poor summer weather, plus the ongoing financial headwinds faced by households."
With high-profile failures including Julian Graves, Clinton Cards and Game, the number of retailers to fall into insolvency rose to 426 in the second quarter of 2012, up from 386 in the previous year, according to a study by PricewaterhouseCoopers (PwC). The number of casualties has been escalating year on year for each of the past four quarters, highlighting the squeeze on the high street as hard-pressed shoppers cut back on non-essential items and seek out discounts. The wettest April and June on record intensified those problems, keeping shoppers at home and dampening the demand for summer clothes.
However, insolvencies across the wider economy, including other sectors such as construction and manufacturing, were down 3% on the previous year. This adds weight to suggestions that recent official figures showing that gross domestic product (GDP) declined 0.7% in the quarter may be overestimating the severity of the double-dip recession.
PwC retail specialist Mike Jervis said: "There has been a clear reduction in the incidence of insolvencies over the current recession compared to previous ones, but retail is the sector which keeps bucking this trend."
He said many retailers have too many high street stores, while shoppers are increasingly migrating online to operators such as Amazon. Mothercare, JJB Sports and Halfords have all revealed dismal results in recent weeks as the wet weather piled more pain on the struggling sector.
The PwC survey showed that the overall number of insolvencies saw the biggest increase in the North East and Cumbria, up 70% to 277. But the West saw failure levels drop nearly a third to 117.
British Retail Consortium director general Stephen Robertson commented: "It's fair to observe that retailers have been pretty robust through these really difficult times. If we are stopping shopping, if we're stopping constructing shops, what we will find is other sectors are hit - transport, construction, for instance. There are huge links between what we see in a robust retail sector and the rest of the economy."
