Sales growth stalling as recovery slows

Concern for the future persists among consumers, business groups are warning, as the latest reports point to a stalling economy.

September's Retail Sales Monitor, produced by the British Retail Consortium (BRC) and professional services provider KPMG, revealed the sixth month of "poor" sales growth, with like-for-like sales up by just 0.5% on the same month in 2009.

And while overall sales were up some 2.2% compared to September last year, the consortium said that the growth was mainly driven by food sales, pointing out that larger purchases in particular were the victims as consumers are uncertain about job cuts.

In addition, BRC director-general Stephen Robertson said that there was "little evidence" that people were bringing forward their major purchases to avoid the 4 January VAT rise to 20%.

"We've now had six straight months of low growth thanks to persistently weak consumer confidence and worries about the future.

"Overall, non-food sales were down on a year ago for the first time since mid-2009," he added.

"With VAT higher than it was last year, and pushing up sales values, it's an even worse performance than it looks.

"It's clear people are cautious and major spending is largely on hold."

Economy recovery slowing

Meanwhile, the latest Quarterly Economic Survey from the British Chambers of Commerce (BCC) suggests that the recovery in the UK economy slowed "considerably" over the third quarter of 2010.

Despite the manufacturing sector displaying some optimistic measures - with a particularly strong positive swing in the balance of turnover confidence - it also saw waning confidence in profitability.

And the survey, which collated responses from more than 5,000 businesses, saw a significant decrease in the service sector's employment expectation balance.

In addition, the BCC is warning that the cashflow balances for both sectors is "worryingly weak".

The organisation has raised the spectre of a double-dip recession, but says this can be avoided if measures are taken now.

Highlighting that the slowdown in Q3 follows an "unusually strong" period of growth in the second quarter, the BCC is calling for the quantitative easing programme by the Bank of England to be increased to £250 billion before the end of the year.

BCC director-general David Frost said that the results "highlight the fact that wealth-creating businesses must be supported for Britain to achieve a sustainable recovery.

"Businesses accept the Government's austerity measures," he added. "But now it's time to shift the national debate from cuts to what needs to be done to grow the UK economy. The private sector will do the heavy lifting - but the Government must play its part by supporting capital investment in crucial infrastructure projects.

"Businesses must be given the freedom to create jobs and wealth, exporters must be supported more actively, and the burden of red tape on employers should be reduced or scrapped wherever possible."

The release of the survey follows the BCC's submission to the Government ahead of its spending review next week, calling for a "pro-growth agenda".

IMAGE Gareth Fuller/PA Wire

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