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Last Updated: Tuesday, 7 February 2006, 08:47 GMT
Stores see 'tough' start to year
Shoppers walking past sale signs
Shoppers are reluctant to spend if discounts are not on offer
High Street sales have made their weakest start to the year for more than a decade, according to figures from the British Retail Consortium (BRC).

After strong growth in the run-up to Christmas, the BRC said stores now faced the reality of a "tough market".

Total sales were 3.4% higher in January than the year before. But like-for-like sales - which strip out the impact of new stores - rose by just 0.2%.

The BRC said it was the weakest start to the year since its survey began.

Like-for-like sales in the three months to January were up by 1.1% on the previous quarter.

Call for rate cut

The squeeze on consumer spending continues unabated
Kevin Hawkins, BRC director general

The BRC's findings echoed those of a survey published last week by the CBI, which also found that the pre-Christmas spending surge was not maintained into the new year.

The BRC said trading fell back significantly after the clearance sales ended. While shoppers were taking advantage of cut-price promotions, people were still unwilling to splash out on larger purchases.

"After the pre-Christmas upturn, we are now back to the reality of a tough, discount-driven retail market," said BRC director general Kevin Hawkins.

"The message from every sector of our industry is the same. The squeeze on consumer spending continues unabated. The economy badly needs a cut in interest rates."

The Bank of England's rate-setting committee meets later this week, but most analysts are expecting UK interest rates to remain on hold at 4.5%.

Despite calls for a rate cut from retailers, analysts say the Bank will also be keeping its eye on the recent signs of a recovery in the housing market and possible inflationary pressures from high oil prices.

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