Shoppers to spend £1bn less in year of pain for retailers

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Cash-strapped shoppers will slash nearly £1bn from spending on non-essential goods such as electrical items, furniture and carpets next year, according to a report.

Retail sales are expected to grow by just 1.2 per cent to £295.3bn in 2012 – their third slowest year of growth in the past four decades – spelling more pain for the sector, according to a report by retail research firm Verdict.

Sales of groceries will grow by 3.3 per cent as consumers eat more meals at home to save money, but spending on non-food items is set to shrink by about 0.5 per cent as the change in attitudes “from extravagant to austere” continues.

That would mean retail non-food sales will have fallen by £9.5bn since the recession of 2008.

Electricals, furniture, floor coverings, DIY and gardening goods will be hardest hit, with sales down by about £900m, and are unlikely to improve until the middle of 2013.

Clothing and footwear will grow by just 2.4 per cent, or £14 extra per person, as a result of higher prices, but the rise in youth unemployment will hit fashion retailers.

The report, compiled in conjunction with business analysis firm SAS, will add to fears that major retailers are in danger of collapsing in coming weeks amid unprecedented levels of price reductions.

It warns that the first three months of 2012 will be the most difficult period for retailers, as consumers tighten their spending after the expensive Christmas period.

Verdict retail analyst Maureen Hinton said: “Conditions will ease slightly with events such as Easter, the Diamond Jubilee and the Olympics improving consumer sentiment, but overall confidence will still be low.”

She said real improvement and growth were only likely from October onwards.