Retailers pay the price as UK economy plateaus

As the ONS confirms its initial estimate that Q1 GDP growth was a measly 0.5%, there's more grim news from the high street.

by Emma Haslett
Last Updated: 06 Nov 2012
Thought the (temporary) disappearance of the ash cloud would spell the end of this week’s doom and gloom? Sadly not: the Office for National Statistics has just published its second estimate of first-quarter GDP growth, and it's sticking to its original estimate of just 0.5%. So it looks increasingly likely that the UK economy has indeed remained pancake-flat for the last six months - while consumer spending has also dropped to its lowest rate in two years. In which case, it's hardly surprising that today saw more dismal news from the high street, courtesy of JJB Sports and Focus DIY...

All of which suggests that the likelihood of the Bank of England voting to push up interest rates over the next few months is increasingly slim: the Monetary Policy Committee will be wary of doing anything that constrains spending further (as pushing up the cost of servicing debt would clearly do). The OECD has urged the Bank to start pushing up rates, if only to contain burgeoning inflation. But they probably shouldn't hold their breath.

Speaking of the OECD, it has also just released its latest global economic outlook, which shows that while the recovery is still on track, it won’t take much to topple it. Having grown by 4.9% last year, it says growth will drop to 4.2% this year, thanks to the effects of the Japanese earthquake and a slowdown in reckons that it would only take another major disaster in a significant economy like Japan for things to start looking decidedly shaky.

One firm who's experiencing the high street slowdown first-hand is JJB Sports - whose new CEO, former Dixons director Keith Jones, has accused it of ‘squandering’ emergency funds it raised in 2009. Apparently its ‘weakness in buying disciplines’ continued, and the chain managed to rack up losses of £181m last year. So bad is it, in fact, that hed reckons it might take five whole years to revive the chain's fortunes. Only five?

But at least it’s still got a fighting chance - unlike Focus DIY, which has finally closed its doors, at the cost of about 3,000 jobs. Although administrators Ernst & Young has already managed to sell off 55 of its 178 stores. That’s about the best silver lining we can give you.

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