Retail spending growth 'to halve'

Clothing and footwear sales are expected to slow later this year

The growth in retail spending is set to more than halve by the end of the summer, according to retail research group Verdict.

The retail analysts predict that sales growth will fall to under 3% later this year, well down on the 6.5% seen in the last three months of 2001.

An end to the recent run of interest rate cuts and rising unemployment are set to hit sales, say suggest.

But the overall picture will be mixed, with some sectors expected to survive relatively unscathed, while others will see sales growth come to a standstill.

End to rate cuts

Last year the Bank of England cut interest rates seven times in an attempt to keep the UK out of recession, bringing rates down to 4%.

The strong level of spending on UK High Streets has helped to offset the downturn in the manufacturing sector, but in the run-up to Christmas there were concerns that spending was getting out of control.

DIY stores are expected to maintain strong sales

The willingness of shoppers to borrow money was evident in the latest consumer credit figures from the British Bankers' Association.

They showed net consumer credit rising by £1.3bn in December - which even allowing for seasonal factors was still well above normal levels.

"I think the main thing that's really fuelled the boom that we've seen has been interest rates," Verdict's chairman Richard Hyman told BBC Radio Five Live.

"Rates being low has dissuaded people from saving and it's made spending on credit very easy."

"We're not going to see the rate falls this year that we saw last year and this is going to be a major factor in turning the tide."

Food in, clothing out

Verdict said that while all retail sectors will see sales growth slowing, some parts will do better than others.

Food retailers - especially those who also offer non-food items - are expected to do well, as are DIY stores and shops selling electrical goods.

But sales growth in the clothing and footwear sector is expected to come to a standstill later on this year, despite enjoying bumper sales in the run-up to Christmas.

"I think the going (for clothing retailers) is going to be pretty tough," said Mr Hyman.

"There are probably too many players doing the same kind of thing, differentiation's the name of the game."

There have already been hints that the sector is heading for tougher times.

Earlier this month Marks & Spencer's chief executive Luc Vandevelde warned that the strong sales growth that M&S had enjoyed over the festive period was unlikely to be sustained.