Rise in UK retail sales expected

British retail sales figures released today are expected to reveal a modest rise in spending in June after some of the country's biggest store chains started their summer sales early to tempt cash-strapped consumers.

Economists expect the Office for National Statistics (ONS) to reveal that sales volumes increased 0.7%, only partially offsetting a 1.4% decline the previous month.

Retailers including Marks & Spencer started their sales early to attract cautious consumers, who are reining in spending in the face of soaring costs and muted wage growth.

The early discounting comes after companies such as department chain TJ Hughes and fashion retailer Jane Norman recently fell into administration, while mother and child retailer Mothercare, entertainment group HMV and chocolatier Thorntons have all announced plans for store closures.

Victoria Cadman, an economist at Investec Securities, forecasts that volumes will rise 0.8%, which is slightly above economists' average predictions.

She said: "Despite this expected improvement in the June data, we suspect that retail sales will record relatively subdued growth for a while longer as disposable incomes continue to be squeezed."

The early start to summer sales would act as a downward drag on sales in July, she added.

Meanwhile, figures also released by the ONS today are expected to show that Government made inroads into its budget deficit in June as austerity measures begin to kick in.

Public sector net borrowing, excluding financial interventions such as bank bailouts, is expected to come in at £12.5bn (€14.18bn) for the month, according to economists. This would be lower than the £13.6bn (€15.4bn) in the same period the previous year.

However, it would still leave the Government's borrowing figures for the first three months of its financial year slightly higher than a year ago after a large increase in borrowing in April.

Howard Archer, chief economist at IHS Global Insight, said the current weakness in the economy is casting "major doubts" on whether Chancellor George Osborne will hit his target of reducing borrowing to £122bn (€138.44bn) this financial year from £143.2bn (€162.5bn) the previous year.