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Public sector spending cuts threaten sales in the regions

The North-South divide in UK fashion retail is set to accelerate as public sector cuts hit cons­umer income and confidence - but there will be “pain” across the country.

About 490,000 public sector jobs are set to be axed following the collation Government’s comprehensive spending review, unveiled on Wednesday and aimed at saving £83bn. Towns and cities in the north of the UK, where there is a much larger proportion of public sector workers, are likely to be hit hardest.

Whistles chief executive Jane Shepherdson said the womenswear chain had already experienced a marked difference in performance between the North and South, and that the contrast would be exacerbated. “I would have preferred to see higher taxation of the rich,” she said.

A further £7bn cut in welfare benefits, including housing benefit and some incapacity benefits, are likely to hit across the board.

Michael Weedon, group communications director at BHF-BSSA, which represents small and independent retailers, said retailers at the lower end of the market would suffer most.

“We already know higher income earners with children will have less in their pocket, with the cuts to child benefits, but other benefit cuts are likely to hit retailers targeting the lower end of the market,” he said. “A lot of these changes will happen over the next four years but a more immediate concern might be the effect on consumer confidence and whether it will trigger a double-dip recession.”

The BRC said on Wednesday that uncertainty over the cuts had already contributed to sluggish growth in non-food retailing. Overall, sales growth on the high street fell from 7.5% for the week to September 26 to 2.2% for the week to October 17.

“The worst part was the waiting. It could be a relief now it’s out of the way,” said Richard Kirk, chief executive of value retailer Peacocks Group. “The build-up hasn’t helped sales.”

Other retailers including Marks & Spencer, Next and Harvey Nichols have shown their support for the Government’s plans. Some 35 retail bosses signed a letter urging the Government not to tone down plans to tackle the budget deficit, to avoid an extra £100bn of extra debt, higher interest rates and taxes.

How do you think the cuts will impact trading? Which sectors will be worst hit? And is your business adapting its strategy as a result? Have your say below.

Disaster areas?

Top 10 counties by percentage of people employed in public sector

Merseyside 36%

Northumberland 35%

East Sussex 33%

Durham 32%

South Yorkshire 32%

Tyne & Wear 32%

Dorset 32%

Lancashire 31%

Shropshire 30%

Cambridgeshire 30%

Source: CB Richard Ellis Retail Consultancy

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