Rising food and energy bills, not to mention the tougher credit climate, which is lifting mortgage costs, are all having an impact on spending.
Although the British Retail Consortium’s January figures were stronger than many expected, fashion seems to be getting the worst of it, with sales dropping despite heavy discounting to clear leftover stock.
Retailers trading close to their banking covenants will be finding it tougher than ever to renegotiate facilities with banks concerned about a consumer slowdown. As a consequence, savvy indies will be putting their expansion plans on hold, looking for ways to cut costs while some may be thinking of selling up.
The government’s planned changes to capital gains tax, due in April, are already pushing many small firms towards an early sale of their business to avoid paying a set 18% on the proceeds, compared with 10% under the old rules.
But who wants to give up on their dream business so easily? After all, none but the most pessimistic analysts are predicting a protracted recession. Sales are likely to be slower for the next few years, but the UK still has high employment and the outlook for 2008 is looking distinctly grey.
Shoppers may be choosing how to spend their cash more carefully, but they do have money to spend when tempted, as the likes of Asos and Ted Baker showed over Christmas.
In the fashion market the art of selling has never been so important. The small retailer, which knows the value of a bright spring frock in the fight against mortgage woes, has a definite advantage.
Sarah Butler is a freelance retail commentator