VAT cut cant stop poor December at retail

Retailers will need to use every tactic at their disposal” – that’s the message from a leading High Street analyst today as it predicts a gloomy December at retail despite Chancellor Alistair Darling announcement of a VAT drop yesterday.

Synovate Retail Performance has claimed that it now expects non-food shopping footfall to drop by 7.3 per cent compared to December last year – far worse than the four per cent predicted in July.

Despite some of the pecuniary pressures lightening over the last month or so and yesterday’s VAT reduction, which incidentally reduces the final retail price of VAT-able goods by only 2.1 per cent, the current evidence is that the number of non-food shopping trips being made by households in the UK is still falling and likely to fall further,” Synovate’s Dr Tim Denison stated.

A general lack of confidence and heightened concerns over job security seem to be uppermost in influencing attitudes and behaviour, taking precedence in people’s minds over falls in energy and fuel prices, interest rates and VAT.

However, retailers are using every tactic at their disposal to stimulate trade and, by our calculations, last week’s promotional activities bolstered retail footfall on the high street by as much as four per cent, so it is certainly not the case that all is lost and cannot be influenced by retail strategists. Where there are compelling offers, there is still latent demand but retailers cannot afford to run such deep-cut events every day in the run-up to Christmas, so inevitably the effect of the stimuli will, unless very creatively renewed, be sporadic and short-lived.

Christmas 2008 is already shaping up to be very different from recent ones. I envisage more of us abandoning the highly-commercialised rumpus that has become Christmas Present and returning to the back-to-basics of Christmas Past. This will see parents and grandparents provide for young children in their families first, and, if necessary, forgo so much spending on each other.”