December 27, 2012 9:26 pm

Caveat for vendors in spite of Boxing Day rush

Record numbers of shoppers poured into many UK stores and malls on Boxing Day, but analysts are warning that 2013 is shaping up to be another tough year for British retailers as austerity continues to stalk the high street.

Retailers, braced for another year of rising costs and cash-strapped consumers, are renewing calls on government to freeze business rates to stem the tide of gap-toothed high streets , where vacancy rates are running at 11 per cent.

“Austerity Britain is here to stay and 2013 will feel remarkably like 2012,” said David McCorquodale, head of retail at KPMG, the consultancy, and a member of the KPMG/Ipsos Retail Think Tank.

“The lack of economic growth and shaky consumer confidence will result in yet another year of deferred discretionary spend, especially for retailers selling big ticket items.”

The prognosis comes as many UK shopping centres were cashing up record takings at the tills – or over the internet, where UK consumers made 113m visits to online retail sites on Boxing Day. As a rough rule of thumb, one in 20 visits translates into a purchase.

However, while the number of visits marked a 17 per cent jump over the previous year, it was 10 per cent below the forecast 126m, according to Experian. The global information services company attributes this largely to merchants pulling forward their sales to Christmas Eve, which resulted in massive increases in online sales on the two days before Boxing Day.

Retailers, like the manufacturers that fill their shelves, are in a double bind. Households, on whom they depend, will have still less money in their pockets next year thanks to higher fuel bills, continued food price inflation and the removal or reduction of welfare benefits – all curbing their ability to spend.

Vicky Redwood, chief UK economist at Capital Economics, sees real pay falling further as inflation outpaces wages rises. “Although the Autumn Statement contained a few sweeteners for households, a number of cuts already announced are still set to go ahead this year. Together, these will knock 0.8 per cent off households’ incomes in 2013. And public sector employment is likely to fall further.”

Meantime, shopkeepers’ own costs are rising. “2013 will bring increased overheads to retailers’ doors, including enhanced pension obligations and rising business rates, which they will be unable to pass on to a consumer already reluctant to part with their cash,” said Mr McCorquodale.

He expects retailers to face squeezed margins as a result, though he added – underlining the trend evident in Christmas trading – that there would be winners and losers.

The British Retail Consortium, which calculates the national town centre vacancy rate is at a new high of 11.3 per cent, is lobbying politicians to freeze business rates – the business version of council tax – which are set to rise by 2.6 per cent next year.

Rates have already risen by over 10 per cent in aggregate in the last two years, adding more than £500m to retailers’ bills during that period, the retail trade body said. It warns that allowing another rise would do further damage to high streets and deter investment and job creation.

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