High Street heads for a bleak Christmas

The High Street is headed for the emergency room this Christmas, according to the latest in-depth survey of the health of the retail sector.

The Retail Think Tank, made up of economists, analysts and academics and using data from SPSL, the footfall auditor, and industry consultant KPMG, has found the health of the High Street as measured by demand, margins and costs has plummeted compared with a year ago.

In its Retail Health Index, where a base of 100 is taken at March 2006, the index is now reading 92 points for the third quarter of the year and is expected to plunge to 84 in the final, all-important Christmas quarter.

"Quarter four will definitely be the quarter where consumers will make or break retail businesses," said think tank member John Dawson of Edinburgh University. "Some smaller, weaker, just plain unlucky or poorly financed retailers will fail in the coming weeks and months."

The survey comes as Verdict, the High Street research organisation, said this year will be the worst Christmas for stores in decades.

It expects sales to come in just 2% better this year, the second-worst performance in 20 years, as consumers are predicted to cut back on everything apart from food.

"The consumer has been on a spending binge with growth in spending outstripping growth in income by some margin," said Verdict's Neil Saunders.

"That was not sustainable. That kind of pattern could not have continued."

The raft of bad forecasts for Christmas could ultimately be good news for the retailer.

Verdict predicts a record amount of discounting in the run-up to the holiday season, effectively moving the New Year sales to pre-Christmas.

That will be bad news for retailers in general, with Verdict also predicting closures and collapses when Christmas shopping ends and sales fall off a cliff.