Retail sales 'declined in March'

Fears over the economy appear to be hitting retail sales

UK retail sales declined in March, posting their first fall in almost two years, the British Retail Consortium (BRC) has warned.

Despite the early Easter, the BRC said like-for-like sales - which exclude the impact of new store openings - declined by 1.6% from a year earlier.

The BRC said the fall showed consumer confidence was now being hit by continuing concerns about the economy.

BRC boss Stephen Robertson said people were now making "serious economies".

Poor weather

The BRC said March's figures were the worst since July 2005, when bad weather hit sales, confounding expectations that the early holiday period would boost the High Street.

Consumer confidence remains on a knife-edge Helen Dickinson, KPMG Tesco profits rise Mixed results for Carphone Debenhams reports fall in profits

It added that most retail sectors reported a decline in sales.

With last month's poor weather also having a negative impact, clothing and footwear stores saw their worst showing for eight years.

Consumers also cut back on furniture and electronic goods.

Food and drink was one of the few sectors to see sales rise, although the level of growth was the weakest since July last year.

"Here is the strongest evidence yet that customers are making serious economies and are increasingly concerned about the future," said Mr Robertson, who is the BRC's director general.

"It's clear customers are concentrating on essentials."

Mixed picture

Results and trading updates from a number of UK retailers on Tuesday painted a mixed picture.

Department store group Debenhams reported a 12.4% fall in first-half profits to £94.1m, with like-for-like sales down 0.7%.

Carphone Warehouse saw its shares drop by 13% after it reported a lower-than-expected number of broadband connections and analysts worried over prospects for the year ahead.

However, retail giant Tesco reported an 11.8% rise in annual profits to £2.85bn, with UK like-for-like sales up 3.5%.

Fashion house Burberry saw its shares rise by nearly 11% after it reported a 19% rise in revenue during the second half of its financial year despite the toughening economic conditions.

Rate cut

Helen Dickinson, head of retail at accountants KPMG, said consumer confidence had been knocked by falling house prices, higher food and energy bills, and concerns about the continuing impact of the global credit crunch.

"Consumer confidence remains on a knife-edge," she said.

The BRC's latest figures will come as no comfort for both the government and the Bank of England.

Last week the Bank cut interest rates to 5% from 5.25% in an attempt to spur both consumer confidence and the wider economy.

It was the Bank's third cut in rates since early December.