Britons' urge to spend will soon brighten today's dark UK retail picture

Shortly after Britain's chancellor sat down after his budget, the Conservative-supporting Simon Wolfson, the chief executive of Next, said that this year would be like 'walking up the down escalator'. It's a tough time for UK retail.

Powered by automated translation

Analysts are calling it the worst week in retail since the end of the recession 18 months ago.

The extent of the UK's rock-bottom consumer confidence was laid bare over the past five days.

The electrical retailer Dixons gave its second profits warning of the year, while the wine merchant Oddbins went into administration. The fashion and home wares retailers Mothercare and Laura Ashley warned of tougher trading conditions.

Even John Lewis, a middle-class department store that seemed indifferent to sentiment, said that last week's sales were down 3.8 per cent on last year's figures.

This follows last month's budget, which did little to relieve the pressure on the household purse.

Immediately before the budget presentation by George Osborne, the chancellor, Justin King, the chief executive of Sainsbury's, warned that there had been a sharp and measurable slow-down in shopping since Christmas. Shortly after the chancellor sat down, the Conservative-supporting Simon Wolfson, the chief executive of Next, said that this year would be like "walking up the down escalator".

One retail analyst said it was the worst he could remember seeing in about 30 years. Now analysts are preparing to hear this week just how bad things have been at Marks & Spencer. The chain is expected to show that underlying clothing sales have gone into reverse.

And all this has occurred even before new tax increases and cuts and freezes to some benefits come in tomorrow, the start of the tax year in the UK. Overall, the changes mean a couple on £45,000 (Dh266,844) with two children and one working parent will be £697 a year worse off. Those on £75,000 will be £452 down.

Those families are possibly the fortunate ones. From the beginning of this month, thousands of public-sector workers are being laid off. The manager of a sandwich shop opposite the Home Office told me last week that at least 1,000 people were expected to go from that busy building.

The job losses would be a double blow to her lunch-time trade. Not only would those who had lost their jobs disappear, but those who remained would be so anxious they would probably turn to Tupperware and cling film, and bring in their sandwiches from home.

She has seen it before. Sales of cling film at Sainsbury's went up 30 per cent in the weeks after the Lehman Brothers collapse.

Howard Archer, an economist who has tracked the UK's progress in and out of recession, says: "Consumers appear to be reining in their spending appreciably as their purchasing power is squeezed by high and rising inflation in tandem with ongoing, muted wage growth overall.

"Concerns about jobs, the economy and fiscal tightening increasingly kicking in are also weighing down consumer confidence and willingness to spend."

Official figures last week also showed that families' disposable incomes fell annually last year for the first time in 30 years.

The squeeze on consumers will put pressure on the Bank of England not to raise interest rates for fear of damaging further an already fragile economy. But with inflation expected to be between 4 and 5 per cent this year, considerably ahead of the bank's target, the City is anticipating that a rate rise next month is on the cards.

Still, for all the moans from retailers, is this "unheard-of territory", to quote the Co-op's chief executive, really such a bad thing?

Much of the consumer boom of the pre-recession years was built on an explosion of relatively cheap credit. But debt is debt, and sooner or later that cheap-transfer rate, or home-remortgage, has to be repaid.

The images of part-built Irish housing estates and families trapped in homes they cannot afford to pay formust have had an impact, so uncomfortably close to home are they.

Britons have become too used to buying a certain lifestyle. We change our home decor not quite as frequently as our socks, but there is a makeover show-inspired mountain of scatter cushions in many homes. A lust for new gadgets has also taken hold, and when a new model comes along, we simply pass the out-of-date but still serviceable old one on to the toddler.

The question is whether we can batten down the hatches, make do and mend, reduce, reuse and recycle without plunging our fragile economy further into the doldrums. I have a hunch that the next few months will be tough, but by September we will be itching to spend our way out of the blues again.