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A consumer slowdown in Britain will worsen next year and any upturn will be compromised by a slew of planned openings of new retail property in the coming years, according to business advisory firm Deloitte.

June 19, 2008

London – A consumer slowdown in Britain will worsen next year and any upturn will be compromised by a slew of planned openings of new retail property in the coming years, according to business advisory firm Deloitte.

“2009 is going to be more difficult than 2008,” Richard Hyman, a strategic adviser to Deloitte’s consumer practice, told the Reuters Consumer and Retail Summit in London yesterday.

“The first half of this year is going to be pretty awful and the second half tougher. We will maybe see it easing in the second half of next year.”

Hyman, a highly regarded commentator on UK retail trends, expected trading to improve in 2010 to 2011 but said that would be tempered by new shopping centres coming on stream and diluting demand.

Total space for retail development had been growing at 0.6 percent to 0.7 percent this year, but for the next four years it would grow at 1.3 percent to 1.5 percent, Hyman predicted.

“The bad news for the UK retail industry is that we’ve had floor space growth net of closures. The shopping centre development pipeline has a very long gestation period and it is very difficult to turn the plug off,” he said.

British inflation rose last month to its highest level since the Labour government took power in 1997, data showed on Tuesday, supporting widespread anecdotal evidence that retailers are suffering as consumer budgets are squeezed by higher living costs.

The Office for National Statistics said consumer prices rose 0.6 percent last month, taking the annual rate to 3.3 percent from 3 percent in April.

J Sainsbury yesterday was the latest shop owner to report disappointing underlying sales in the past three months. It indicated that consumers were shopping more cautiously.

Discretionary items have been hardest hit, with clothing and footwear sales falling by 5 percent in the past 12 weeks compared with the same period a year ago, according to data from TNS.

Property letting agents have suggested the slowdown could make it difficult for the new shopping malls to find enough tenants. Attention is particularly strong on the high-profile Westfield London shopping centre, which is due to open this year.

Meanwhile, chancellor of the exchequer Alistair Darling said Britain’s economic policy makers must prevent inflation sparking off a surge in wages, giving political backing to the Bank of England to raise interest rates if necessary.

The treasury and central bank must seek to contain rises in food and fuel prices from spreading to wage demands by consumers, Darling said in an interview on BBC Radio 4.

“This year will be difficult,” he said. “There is no doubt that if you go to the pump or go to the supermarket, you can see the difference.

“People are seeing the difference, and they want to know what the government is going to do about it.”

His comments put the Labour government on a collision course with unions demanding higher wages.

David Prentis, the general secretary of Unison, which represents 1.3 million public sector workers, said in response to Darling’s interview: “Our union will organise the most powerful campaign ever seen in support of public services.”