Retailers ‘to face tough decade’

Even in London – where sales are expected to grow more quickly – trade will not fully recover until 2013

UK retailers could be facing many years of poor sales growth, an economic think tank has said.

Consumer spending is expected to rise by only 2% a year in the 10 years up to 2020, according to Ernst & Young’s Item Club.

Spending is being weighed down by debt repayments, restricted lending and high inflation, with the prospect of interest rate rises yet to come.

The effect is expected to be harshest outside London, the Item Club said.

For the UK as a whole, spending is expected to rise by only 0.6% this year and by 1.3% in 2012.

And even though spending in London is expected to pick up by a relatively robust 1.5% this year, total spending in the capital – as across the whole country – will still not fully recover to pre-recession levels until 2013, the Item Club predicts.

“The squeeze on household budgets is only going to intensify this year, as the gap between high inflation and subdued wage growth continues to widen and we experience a second consecutive year of declining disposable incomes,” said Andrew Goodwin, chief economic adviser to the Item Club.

The research group forecasts that disposable income will fall again this year, by 0.1%.

Technology and leisure retailers are expected to be best positioned for any rebound in spending, while the outlook for hotels and restaurants is bleak.

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