Retail chiefs forecast slow consumer recovery

Of 31 industry leaders polled in February and March, 73% said that they did not expect the consumer market to pick up until 2011 or later, more than double the 34% who expressed this sentiment in September last year.

Rose said: “I think this year will be flat and it won’t pick up until the middle to the end of 2011.”

Wolfson added: “There is no doubt that things have recovered since January 2009, but there is no reason to think that growth will accelerate until the Government has stabilised its finances. I do not anticipate a continued recession, but any growth will be sluggish as the Government continues to try and balance its books.”

Retailers face uncertainty about conditions after the general election – which is set for May – with the likelihood of tax rises, a post-election VAT increase and fears of a weak pound fuelling inflation compounding concerns.

McPhail said: “I think it is going to be a tough year for the economy. People were quite buoyant going into Christmas, but whoever wins the election will have to take radical action to cut debt, probably increase VAT and that is going to affect consumer confidence.”

The proportion of retail executives who said they were more positive than negative about the future dropped to 53% from 66% in September.  Some 10% said they were more negative, compared with just 3% when they were last polled.

More than a fifth of retailers polled by PR firm Kreab Gavin Anderson for its retail outlook report, said shoppers were less positive than six months ago, a dramatic jump from the 3% who held the view in September.

Nearly two thirds of those polled said that the election would have a dampening effect on trading and 69% said that they would expect a rise in VAT post the election.

42% predicted inflation would be between 2.5 and 3.5% in the next six to 12 months and nearly half of respondents said that they thought they would have to raise prices.

Debenhams chief executive Rob Templeman said: “Any rise in VAT is not going to help either the consumer or retailers and potentially could lead to inflationary pressure.”

Kingfisher chief executive Ian Cheshire said: “The worst moments of panic and fear are past and there is a recovery of confidence and a resumption of activity but it doesn’t feel like there is going to be a ramp up, it feels like things are flat-lining.”

Aurora Fashions chairman Derek Lovelock said: “The younger consumer is still quite confident and still shopping but shopping in a totally different and very savvy way. They spend more time thinking about a purchase and less time wandering around shopping. When they come out they have spent time on the web researching, they know what they want and what they are going to pay for it.”

M and M Direct chief executive Steve Robinson said: “Sterling has weakened and that will feed through to non-food prices because of the amount of products we import from the Far East. Margins are under pressure and if consumer spending recovers then retailers might pass on some of the price rises.”