Retailers facing a 'tough' 2008

The report predicts that some retailers will prosper while others fail

Retailers face one of their "toughest ever years" in 2008, a report into the sector across the UK has warned.

Like-for-like sales, which exclude the impact of new store openings, could fall 0.2% in 2008, said the report by retail analysis group Verdict Research.

It predicts the decline due to "a dangerous cocktail" of slowing consumer spending, intense competition and an excess of new store openings.

As a result, Verdict predicts a rise in the number of retail bankruptcies.

'Supply and demand'

According to Verdict, consumer spending will slow in 2008 as households feel the pinch of higher energy costs and other bills.

There are undoubtedly rough times ahead which will sort out the winners from the losers - and not all of the losers will survive Neil Saunders, Verdict Consulting

As a result it sees the rate of overall consumer spending growth slowing to 2.4% in 2008 from 3.5% last year.

At the same time, Verdict says retail space will rise by a further nine million square feet across the UK this year, on top of the additional 49 million square feet opened since 1998.

"Unfortunately for retailers, the laws of supply and demand are absolute - demand from consumers is falling at a time when retail supply in the form of new space is increasing," said Verdict's consulting director, Neil Saunders.

"The bottom line is that there just isn't enough growth to go around between existing physical retailers, new space and the internet. Something somewhere has to give."

While Verdict says the most successful retailers will continue to see their like-for-like sales grow, "the outlook for others will be less positive".

"We are not predicting disaster for the retail economy as a whole, but there are undoubtedly rough times ahead which will sort out the winners from the losers - and not all of the losers will survive," added Mr Saunders.

The British Retail Consortium, the sector's main trade body, reported earlier this week that like-for-like sales across the industry rose 2.6% in January.

That followed after a rise of just 0.3% in December.