British high street hit by sales slump

THE Bank of England faced calls for further interest rate cuts last night after a key survey showed the British high street suffered its worst July in a decade.

Data from the British Retail Consortium (BRC) showed same-store retail sales fell 1.9% last month on the same period a year ago - although the group said the impact of the London bombings could have been far worse.

The BRC said last week’s reduction in the cost of borrowing was “welcome” but would take several months to have any significant effect on consumer spending.

BRC retail director Kevin Hawkins said: “More cuts are needed between now and Christmas.”

July is usually a stronger month due to factors such as the summer sales, but the BRC said cooler, wetter weather meant it was “much worse” than June.

It said that some good clothing sales on the warmer days failed to offset difficult trading elsewhere. This contributed to the weakest July performance since 1995. Total sales, taking into account new floor space, increased by 2% over the last year.

Analyst Nathan Cockrell, at Credit Suisse First Boston, said any hint of an improving trend had been “abruptly dismissed” by yesterday’s figures.

He said the data showed underlying consumer demand remained under pressure and was likely to weaken further ahead of any recovery sparked by the reverse in interest rates.

However, many experts expressed relief that the London bombings did not have as big an impact as had been feared.

KPMG head of retail Helen Dickinson said many experts thought the impact of the bombings, together with general deterioration throughout the year, could have been much worse.

Analyst Matthew McEachran, at Investec Securities, said it would not have been unrealistic to have expected a sharper slump following the attacks.

He said: “The overall nationwide impact of the bombings might be quite small actually.

“I’m not sure that this data adds new weight to the debate for a rate cut.”

He believed it was unlikely there would be another rate cut this side of the Christmas season.

The data also showed “generally good” growth in sales of food and drink, although this tailed of in the second half of the month when the weather cooled.