Shopper confidence vanishes amid retail gloom

Gloomy statements from the high street and the housing sector yesterday strengthened the case for the Chancellor not to raise interest rates. Some of Britain's best-known retailers blamed job insecurity, the threat of higher mortgage payments and gloomy predictions on house prices for the continued fragility of consumer confidence.

Housebuilders blamed rising interest rates and changes to personal taxation for stifling the recovery and pushing sales of new and old houses below last year's levels.

The cries of anguish attest to the weakness in retail sales which the Central Statistical Office revealed last week had stagnated since last July. They point to the continuation of the feel-bad recovery, in which exports and investment are favoured while the growth of consumption remains sluggish at best.

The going has definitely got tougher in the first few months of this year. Large retailers managed to increase the current value of their sales by 6 per cent in 1994. But in the first quarter of 1995, the annual rate of increase slipped to 4 per cent, the lowest rate in the 1990s.

Household high street names such as Littlewoods, Laura Ashley and House of Fraser, owner of the Dickens & Jones and DH Evans department stores, all held their annual meetings yesterday and voiced concerns over the elusive confidence factor.

The only shaft of light came from Storehouse, the retail group which yesterday announced plans to create 1,000 jobs over the next year in eight new branches of BhS and seven new Mothercare shops. Even here there was caution as Storehouse chief executive Keith Edelman warned on the quixotic behaviour of the 1990s shopper."It's very, very tough and putting up interest rates would be disastrous," he said.

House of Fraser chairman Brian McGowan echoed the concerns, telling shareholders that retail sales had been "somewhat erratic". Consumer confidence had strengthened at various times in the year only to vanish, he said.

Littlewoods, the pools and stores group, said 1994 had been a difficult year. The company said trading remained tough and that the National Lottery had knocked the shine of the pools business.

The nervous noises follow a flurry of warning signals from the high street. Last Friday, WH Smith issued its first profits warning in 15 years, blaming weak trading patterns and reduced sales in core high street stores. Reject Shop, the chain of household stores, collapsed into receivership on the same day.

Earlier this week, the Safeway supermarket chain announced 3,000 job losses in its stores as a result of a management restructure. However, the company said it would create 7,500 jobs over the next two years when it will open 34 new stores.

Some industry analysts feel the runaway success of the National Lottery is playing a key part as it drags spending away from other sectors. The weekly lottery draw and the Instants scratch cards are now taking pounds 100m a week, equivalent to five per cent of UK retail sales.

Julie Ramshaw, retail analyst at stockbroker Morgan Stanley, says: "If the National Lottery is taking pounds 5bn a year, that money is coming from somewhere because it is extra money."