Christmas to come early for retailers

Brace yourselves for an onslaught of festive cheer: according to new figures out today, consumers are expected to head to the high street with renewed vigour in the run-up to Christmas. Apparently, 43% of retailers saw a rise in their sales during November – significantly up from October’s 36% - with clothing and food retailers reporting the best figures. Unfortunately for them, the CBI, which commissioned the survey, says this renewed enthusiasm for shopping stems from  consumers’ concerns about the VAT rise, due to come in in January. This national attack of shopaholicism might not last very long.

One of the main reasons the CBI gave for the jump is low interest rates, which are keeping mortgage rates low, thus leaving shoppers with a bit of extra disposable income to play with. ‘We’ve never had it so good’, as Lord Young might say. And some of the UK’s top retailers are already showing evidence of that: John Lewis, for example, reported that sales were up by 12% in the first half of this week, with most of the extra spend going into the decidedly Christmas-friendly home, fashion and electrical merchandise departments. And Tesco says it’s planning to expand the amount of space it allocates to its Christmas range in its 220 giant Extra stores.

All this may seem encouraging, but the evidence suggests it may be a temporary phenomenon. Once VAT goes up to 20%, that’s where it ends, says the CBI. In fact, the number of businesses that expect the boost in sales to last for the next three months is down to 11% - half October’s figure. Even ratings agencies are refusing to be swayed by the figures – Moody’s has warned that the UK is facing a ‘tough year’, with confidence down, bank lending continuing to be tight, and house prices falling. Happy new year….

In fact, as all these spending cuts start to bite, things could get a lot worse before they get any better. So retailers need to make the most of this festive mood while they can.