Business Finance News From United Kapital

UK Retail Sector To Face Tough Year Ahead

Wednesday 11th of January 2012

According to a recent report by Verdict Research, the UK retail sector faces another tough year in 2012 because consumers continue to cut back on spending.

The report suggests that consumer spending will grow by 1.2% this year. This shows spending to be the third slowest rate in over 40 years. As a result, many retailers are worried about the forecast for 2012 and some may even need to shut down.

One area of sales that are expected to be hit hard is food sales. This is because people are expected to eat out less, especially after Christmas.

Maureen Hinton of Verdict commented on the report, "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."

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

The report also shows that consumers are expected to have spent at least £22.8bn by the third week of January in 2012.

Many stores had to start their January sales early, to encourage consumers to buy before Christmas.

In Slough, retailer Ravi Hansra, owner of AB Superstores, 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."

It is expected that pound shops are still benefitting most from consumer spending cutbacks, as shoppers look for cheaper options to their traditional brands and prices. This trend looks like it is set to continue in the year of 2012.