Big freeze hits UK retail sales

Britain’s big freeze left retailers out in the cold this month as the sector reported its worst sales performance since August, figures revealed today.

The end of the temporary VAT reduction also hit sales in what is traditionally a buoyant month at the height of the January clearance season, according to the latest survey from the CBI.

The business lobby group’s monthly survey – between January 4 and 15 at the height of the snow and adverse weather – found 36% of retailers saw sales fall, while 28% reported a rise to leave a balance of minus eight.

This is the first negative figure in four months and marked a disappointing setback for retailers after they previously forecast flat sales in January, said the CBI.

Andy Clarke, chairman of the CBI distributive trades panel and chief operating officer of Asda, said: “The big freeze kept many shoppers away from the January sales and the VAT hike has hit bigger purchases like furniture and electricals.”

He said that despite 2010 opening on a “weak footing”, the picture should stabilise in February.

Retailers are expecting sales to be flat on a year ago next month as the effect of the VAT rise subsides after many shoppers rushed to make their purchases in December.

This month’s sales are also thought to have been held back by less aggressive discounting.

However, the January result reinforces the widespread belief in the sector that 2010 will be a cautious one for consumer spending.

Vicky Redwood, UK economist at Capital Economics, said: “Overall, this survey underlines our view that we shouldn’t expect much from consumers this year.”

She added it would add to fears the UK economy will struggle to maintain a recovery after yesterday’s figures revealed a weak 0.1% rise in GDP in the final three months of 2009.

“The drop in January’s UK CBI distributive trades survey will reinforce concerns that the UK economy could relapse at the start of this year after its meagre growth in in the fourth quarter of last year,” she said.

Today’s survey showed that only food retailers and those in the footwear and leather sector saw significant growth in sales this month.

Sectors linked to the housing market were worse off, with sales volumes in durable household goods and furniture and carpets dropping after three months of growth.