UK retailers expect sales to worsen in 2011

Majority of the retailers in the UK expect sales to worsen in 2011 amid growing concerns over weak consumer demand and inflationary pressures.

Nearly 64 percent of the UK retailers predict sales to worsen next year with only 18 percent see sales improving, according to a survey released on Monday by British Retail Consortium (BRC).

“Retailers expect a difficult December to be followed by a tough 2011. They believe the VAT rise will contribute to higher prices and, with fears about Government cuts and the wider economy, people will be put off spending,” said Stephen Robertson, director general, BRC.

In its emergency budget in June, the coalition government proposed spending cuts amounting to £113 billion ($179 billion) per annum by 2014-2015. It plans to increase tax revenues mainly by raising value added tax (VAT) from 17.5 percent to 20 percent by January 2011.

According to the UK Office for Budget Responsibility's (OBR) forecast, Britain will see 500,000 public sector job losses by government spending cuts.

The BRC survey showed majority of the retailers wanted the government to reduce or relax existing to make UK a great place to do business.

The message for Government is clear. At a time of public sector cuts, retailers want to go on delivering the economic growth the country needs. But politicians must help them by rowing- back on costly regulation,” Robertson added.

Also, inflation has been a concern in the U.K. for the past several months. Consumer price index inflation rose to 3.3 percent in November, remaining above Bank of England's (BoE) target for the ninth month, spurred by a hike in food and non-alcoholic drink prices.

In December, the BoE continued to maintain its base rate at 0.5 percent, as the economic recovery continues to remain uncertain and financial crisis continues to worsen in the eurozone.

BRC said that despite these concerns retailers continue to focus on long-term growth prospects with 47 percent of surveyed expect to create jobs in 2011.

But the positive news is retailers have their eyes on the horizon and are demonstrating more faith in longer-term prospects. An encouraging proportion intends to increase investment and create jobs,” said Robertson.

Amid concerns over uncertain economic conditions, the UK Office for Budget Responsibility lowered its forecast of economic growth to 2.1 percent next year, from 2.3 percent estimated earlier.

According to a recent survey by BoE, more than one in two people with unsecured debts such as credit cards or personal loans are finding it difficult to cope with the burden.

Borrowers who felt credit card debts or personal loans as a burden rose to 51 percent, reaching the highest level in 15 years since the study started.

The burden of unsecured debt has risen this year, most likely reflecting a combination of weak earnings growth and the interest rates on unsecured debt remaining high despite falls in Bank rate, BoE said.