After the initial optimism from the retail sector at the beginning of the year – brought on mainly by customers swarming all over ludicrously heavily discounted sales not only after but also before Christmas – the industry is now feeling the full force of the recession once again.
Retail sales dropped by 0.6% sales from April to May, figures just release by the Office for National Statistics (ONS) have shown. Household goods stores took a particularly savage blow, seeing sales evaporate by 7.3% from in the March-May quarter, while clothing and footwear is also suffering with a sharp month-on-month fall of 1.9%.
The bad news is compounded for high-street shops with the Bank of England’s report showing bank lending to companies outside the financial sector dropped by 5.4% in April – the greatest reduction in nine years. The Bank said: "Lenders report that demand for new credit continues to be constrained by weak investment intentions and businesses' desire to reduce debt levels."
We find that a little hard to swallow. And, frankly, incredibly self-defeating. Retail businesses account for one fifth of the UK economy, and the sector contributes 8% of the UK’s gross domestic product. If we support and save that sector, we’ll be much closer to shoring up our economy. Which, as you will have noticed if you’ve read the papers today, is still incredibly fragile and wounded.
If anyone needs the financial support banks can offer, it’s high-street retailers. But they need other businesses to trade with too. We hope that Mervyn King’s calls for a speedier reform of the financial word don’t just fall upon deaf ears – Alistair Darling seemed to clash with the Bank of England’s governor on the question of regulation last night. The banks need to start stimulating the economy more effectively with lending, so sectors as important as retail can stand a chance of seeing it through this blackness.