High Street 'misses pre-Christmas boom'

Shopkeepers were disappointed by weak sales

The UK service sector is riding high, with some firms finding themselves unable to keep up with rocketing demand, according to a report released on Thursday.

Money in the till for the service sector...

But the retail sector expanded slower than expected in the run-up to Christmas, and the outlook for January's High Street sales is muted, according to industrialists.

Overall, shopkeepers' fortunes were mixed during the last two weeks before Christmas, with 49% of retailers reporting more sales, and 33% reporting less, the Confederation of British Industry (CBI) said on Thursday.

"Retailers reported that sales improved in December but fell short of a pre-Christmas bonanza, and their growth expectations for January are only moderate," the chairman of the CBI's distributive trades panel said.

The CBI figures were up compared to November 2000 but down compared to December 1999.

Service sector optimism

The outlook for the service sector is more optimistic.

...but retailers had a rough ride ahead of Christmas

In December, it expanded for the twenty-second consecutive month, and the pace of growth appeared to be picking up, according to a survey by the Chartered Institute of Purchasing and Supply (CIPS).

The seasonally adjusted business activity index for the service sector rose from 57.0 in November to 57.8 in December.

In the service sector, optimism is rising with ever more people being hired by companies eager to meet not only existing strong demand, but also an anticipated strong influx of new orders.

Despite this, the service companies' back-log of outstanding work is bulging at the seams, with more companies reporting that they can not meet demand.

The service sector's expansion comes as the UK economy continues to grow, and in an economic environment where inflation is falling, the CIPS survey said.

Despite this, the service companies' margins are being squeezed by higher costs, the survey said.

The sector has also increased spending on sales and marketing.

Winners and losers

In the service sector, the strongest growth was found among computing and IT firms, while in the retail sector the winning sectors were groceries, books, hardware and other so-called durable household goods.

The losers in the retail sector were shops selling clothes, furniture and carpets.