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High street revival `unsustainable`

A leading credit ratings agency has dismissed recent signs of life on the high street as unsustainable, predicting that the downturn may continue through to 2011.

Fitch played down recent positive trading figures from a number of firms including fashion chain Next, which said that fine weather in the first half of its trading year had added between 2% and 3% to sales.

But the ratings agency said the upturn was temporary as a later Easter, better weather and many early sales conspired to give trading an artificial boost.

Retail and consumer analyst Ching Mei Chia said: “Rather than signalling an economic recovery, the recent better-than-expected trading results have been boosted by temporary factors such as weather and early aggressive promotional activities and clearance sales.”

Fitch added that retailers may have tied themselves in knots with the early sales, which left margins squeezed and firms backed into a corner to keep promotions or suffer shoppers looking elsewhere after becoming accustomed to price cuts.

Ms Chia said: “Consumer spending will be constrained through 2010, likely delaying a lasting recovery for UK retailers into 2011.”

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