16 Jun 2011

British retail sales drop over twice as fast as expected

High street sales fell 1.4 per cent in May, ending the boosting effect of the April Royal Wedding and the run of bank holidays.

British retail sales drop 1.4 per cent (Getty)

Figures from the Office for National Statistics (ONS) show total volumes including the sale of petrol were down by 1.4 per cent, more than double some City predictions.

Food stores, which had returned a record performance in April, were down – the first such decline in over a year. Sales of household goods such as furniture and electrical goods fell and DIY shops saw their sales volumes drop sharply.

The ONS said consumers were paring back their spending because of increasing fuel prices, uncertainty over pay and lack of job security. It said the smaller retailers seemed to be doing slightly better than their larger rivals.

Some analysts say the ongoing downward slide will continue as a direct result of the squeeze on worker’s pay. Vicky Redwood, an analyst at Capital Economics, said: “We continue to think that overall household spending will drop by about 1 per cent this year.”

Some economists have already predicted that the lack of consumer confidence attested to in today’s figures will lead to the Bank of England keeping interest rates on hold until next year.

Bucking the general trend, luxury good manufacturer Mulberry has more than quadrupled its annual profits, making £23.3m profit in the year to 31 March, compared to £5.1m in the previous year. The company has expanded capacity by 30 per cent at its Somerset factory, creating 50 new manufacturing jobs to meet the rising demand for its women’s handbags.