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Last Updated: Tuesday, 30 August 2005, 07:06 GMT 08:06 UK
Dreary summer on the High Street
High Street sale sign
Many stores brought forward their summer sales to boost business
Retailers have suffered one of their worst summers on the High Street in years - and the situation is set to remain bleak, according to the CBI.

One in five retailers expect trade to worsen in the next quarter, the group said, against 13% who expect a rise.

This is the first time in seven years that stores have been more negative than positive about their prospects.

Some 45% of retailers said August sales volumes were down on the previous year, compared with 27% who reported a rise.

The gloom persisted despite heavy price cuts and extended summer sales, the CBI's distributive trades survey said.

'Very tough'

The CBI said its underlying annual sales trend, measured over three months, was also at its weakest level in the survey's 22-year history.

Conditions in August continued to be very tough for retailers and many fear the outlook is going to get worse before it improves
John Longworth, CBI

The Bank of England cut interest rates for the first time in two years in August - to 4.5% - to reignite flagging consumer spending, but this has yet to filter through to the High Street.

The cooling off of the housing market has also had an impact on certain retail groups, particularly the DIY sector and furniture chains.

"Some held earlier and longer summer sales despite margins already being very tight, but there has been little sign in this survey of a response from consumers," said John Longworth, chairman of the CBI's distributive trades survey panel.

Of the retailers questioned, 38% reported lower prices in August than a year ago, while 18% noted a rise in prices. Meanwhile, 35% of retailers took on fewer employees this year, while 26% said they took on more.

"Conditions in August continued to be very tough for retailers and many fear the outlook is going to get worse before it improves, despite the recent interest rate cut," said Mr Longworth.

China syndrome

Meanwhile, the European Union's capping of textiles imports from China has put further pressure on retailers. Many are unable to take delivery of new stock which has been piling up in warehouses.

"It will be the unwitting customers who, as always when countries indulge in protectionism, end up having to pay more money," said the CBI's director general, Sir Digby Jones.

But despite the latest gloomy report from the CBI, recent official figures on retail sales have not been as downbeat.

Sales are still rising year-on-year, the figures say, with signs that the official underlying trend may be stabilising after a slowdown earlier in the year.

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