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UK retailers could face a decade of poor sales growth says think tank

UK retailers could be facing many years of poor sales growth, an economic think tank has said.

In a special report by the Ernst & Young ITEM Club it says that depressed wage growth and rising inflation will see consumer spending grow by just 0.6% this year and 1.3% in 2012, before rising to 2.2% in 2013.

They say UK high street faces a difficult decade, with consumer spending set to remain below pre-recession peaks until at least 2013 and growth in spending to be subdued for a further seven years, as households focus on paying down debt, according to the Ernst & Young ITEM Club.

ITEM Club expects consumer spending to grow by an average of just 2% a year to 2020, compared to 3.3% in the decade prior to the recession. Disposable incomes are predicted to fall again this year, by 0.1% – a situation last seen in the 1970s - before growing by 1.4% in 2012.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, comments: “The squeeze on household budgets is only going to intensify this year, as the gap between high inflation and subdued wage growth continues to widen and we experience a second consecutive year of declining disposable incomes. It will be 2013, before consumers are really able to start enjoying the recovery.

“However even then consumers are going to be much more cautious in their spending habits, particularly once interest rates have started to rise and mortgage and debt payments spiral.

“Rather than splashing their cash, we’re expecting to see consumers keeping a firm grip on their purse strings and continuing to pay back their debt

This was posted in Bdaily's Members' News section by Ruth Mitchell .