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Retail sector faces 'toughest year'

The UK retail sector will slip back into negative like-for-likes this year with the slowdown in consumer spending compounded by space saturation and intense competition, according to a report by Verdict Research Consulting.

Verdict said that like-for-like retail spend would contract in 2008 causing a significant number of casualties in the retail sector.

Verdict predicts that total retail spending will grow by 2.4% or £6.7 billion in 2008. Growth coming from new space - there is nine million squar feet due to come on stream this year - will equate for around £4.8bn of growth. Similarly growth from internet sales will be worth £2.4bn. This puts growth for existing space in negative territory, -0.2% or -£500 million.

Growth in fashion retail is expected to slow to 3% in 2008, down from 3.9% in 2007.

Consulting director Neil Saunders said: "Unfortunately for retailers, the laws of supply and demand are absolute: demand from consumers is falling at a time when retail supply in the form of new space is increasing. The bottom line is that there just isn't enough growth to go around between existing physical retailers, new space and the internet. Something, somewhere has got to give."

Saunders added: "We are not predicting disaster for the retail economy as a whole but there are undoubtedly rough times ahead which will sort out the winners from the lowers - and not all of those losers will survive."

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