A string of British retailers eased fears of a collapse in consumer spending over Christmas today but warned rising unemployment and plunging house prices would blight trading for months to come.
The cautionary comments from the likes of fashion chain Next and department stores group Debenhams were backed by surveys showing tumbling house prices, a weakening services sector and sliding consumer morale.
The data and retail pessimism will keep pressure on the Bank of England to deliver another big cut in interest rates from the current 2 per cent on Thursday.
Britain has slashed interest rates and cut taxes in a bid to ward off a deep recession. But a stream of gloomy economic news and retail business failures suggests worse is still to come.
The Nationwide Building Society reported a record 15.9 per cent annual drop in house prices and sliding consumer confidence in December.
Another survey showed the services sector contracting at a near-record pace and shrinking for the eighth month in a row. There were "few meaningful signs of any turnaround," said RBS economist Ross Walker.
In the retail sector, the
Timesnewspaper said landmark British store group Marks & Spencer would announce over 1,000 job losses on Wednesday, while Tesco, Britain's biggest retailer, kept up the pressure on the industry by announcing 3,000 price cuts.
Debenhams Chief Executive Rob Templeman said lower interest rates, taxes, food and fuel prices should all help consumers in the coming months, but rising unemployment meant a quick recovery was unlikely.
"The thing that drives consumer behaviour more than anything else is: have I got a job," he said on a conference call.
Debenhams, Britain's second-biggest department stores chain behind employee-owned John Lewis, reported a 3.5 per cent drop in sales for the 18 weeks to January 3rd at stores open more than a year, better than many analysts had feared.
The group, which runs almost 150 stores across the UK and Ireland, also said pretax profit had risen over the period, confounding fears that big discounting in the run-up to Christmas would hit profits.
Templeman said Debenhams had not cut prices or promoted much more than last year, but it had backed up its offers with a stronger public relations offensive.
Gross profit margins were flat over the 18 weeks, helped by demand for the group's "Designers at Debenhams" ranges which are more profitable than sales from concessions.
Debenhams, whose shares have plunged over 80 per cent in the past two years on fears about its ability to pay off its debts, also eased some fears about its finances.
Reuters