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No retail growth until 2014

Next year will prove to be one of the worst years on record for high street retailers, according to Verdict Research, with positive growth not set to return until 2014.

Verdict estimated that retail spending growth on the high street, excluding online sales and sales at grocery multiples, will shrink by more than 4% in 2009, the largest drop since its records began in 1965. The research firm warned that tough trading could wipe £3.6 billion from retail profits in 2009, with the average operating margin falling 3.8 percentage points to 2.8%.

Verdict predicted that the downturn on the high street will continue until 2013, with sales declining from £157.5 billion in 2008 to £139.9bn by 2013. However Verdict said positive growth would return in 2014.

Verdict added that the recent cut in VAT would do little to stimulate consumer spending in 2009. It said that more cautious consumers, and more spend diverted to food and the cannibalisation of sales because of the internet would all contribute to the high street's decline.

According to Verdict, income growth has run at an average of 2.4% a year, but has been outstripped by spending growth, which has grown by 3.3% a year.

Neil Saunders, consulting director of Verdict, said: "The consumer is unprepared for this downturn, most are in an incredibly weak position to deal with it and there is simply no wriggle room in household budgets. No amount of VAT cutting is going to change that."

Saunders added: "2009 will be a lean year for most retailers. With incredibly thin margins in most sectors, many are already taking a hit with the deep discounts they're offering: that situation will only worsen in 2009."

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