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Money worries add up to a tough 2008

So have the tolling bells of doom drowned out the Christmas jingle bells, or can retailers look forward to a happier new year?

Last year was tough for retailers, and talk of tightening credit availability and a slowing economy makes for a gloomy outlook. Pre-Christmas profit warnings from Alexon Group and Moss Bros hinted at problems across the high street, with most retailers expected to report flat underlying sales at best in their Christmas trading statements.

The Bank of England’s decision to gift retailers an interest rate cut last month came too late to affect monthly bank balances, but did boost consumer confidence a little. Further interest rate cuts this year look increasingly likely, with some analysts predicting cuts to 4%. That would also be a fillip.

However, as last year showed, interest rate changes now have a slow-burn impact on consumers because of the prevalence of fixed-rate mortgages. Many households were protected from last year’s series of interest rate rises by cheap fixed-rate deals, which are only now coming to an end. A quarter-point interest rate cut is not much comfort to fixed-raters, who will see an average £150 rise in monthly outgoings in the first quarter of the year when their deals expire. Meanwhile, banks, under pressure from the credit crunch, have been slow to pass on the December base rate cuts to their customers. All of this adds up to a tricky start to 2008.

The most canny retailers will have kept stocks tight and played for maximum margin over the Christmas period. This year will also be about the efficiency game. But the key to success will be to provide inspirational fashion that will make shoppers forget their money worries.

Sarah Butler is a freelance retail commentator

Readers' comments (1)

  • Easy peasy to write and commentate on......a leetle bit more challenging to action.

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