NEWS
RELEASE

One in five retailers (20%) say the overall business outlook - including sales volume, price, cost and supply issues - will deteriorate over the next quarter compared to just over a tenth (13%) who say it will improve, a balance of minus seven per cent.

It is the first time for seven years more have been despondent about the future than hopeful and only the second time since 1992. The new figures are published today (Tuesday) in the CBI's Quarterly Distributive Trades Survey.

The volume of sales in August compared to a year ago was down for almost half of retailers (45%) while only a quarter (27%) reported a rise. This balance of minus 18 per cent is despite heavy price discounting and longer than normal summer sales and follows similar figures for June and July.

The underlying annual sales trend, measured by the three month moving average which cancels out short-term blips, is the weakest in the 22 year history of the survey.

The gloom looks set to continue into next month at least, with a third (34%) believing volume will be worse than 12 months ago and just 19 per cent forecasting an increase, a balance of minus 15 per cent.

By sector, sales of DIY and hardware items, furniture, flooring and carpeting, white goods and big ticket electrical products like plasma screen televisions continue to be hit hard. This is a reflection of the subdued housing market and tightening of belts among consumers, and a stark contrast to last summer when most enjoyed strong year-on-year growth.

Sales of confectionery, tobacco and newspapers and magazines were also lower than 12 months ago, continuing an underlying decline although sales of groceries, particularly specialist foods, were up (positive balances of 20% and 45% respectively).

With conditions so tough, prices have been steeply cut by many retailers with two fifths (38%) reporting prices were lower this month than a year ago; one fifth (18%) registered a rise, a balance of minus 20 per cent. The London bombings do not appear to have had much of an impact on the national picture, by volume of sales, although this was already poor in June.

The volume of orders to suppliers has also decreased, with 39 per cent saying they are down year-on-year compared to 27 per cent saying they are up, a balance of minus 12 which is expected to worsen to minus 15 next month.

With sales down and prices down there have been job losses: a third of retailers (35%) had fewer employees this year than a year ago, and only a quarter (26%) had more - a balance of minus nine, which is expected to grow to minus 11 next month.

The depressing picture continues into the motor trade which traditionally enjoys an upturn at this time of year with the appearance of the new registration plates on dealers’ forecourts.

But more than half (51%) fear sales will be down in September compared to a year ago, maintaining the recent trend. Just a fifth (20%) say they will rise, a balance of minus 31 per cent. Prices stabilised in August after increasing throughout 2004.

This depressed picture though is not matched in wholesaling where there is a still long-term growth in sales (albeit at a rate which has been slowing down) and overall business expectations are optimistic for a second successive quarter (a balance of plus 25 per cent).

Wholesale volumes continue to be above average for the time of year and this is expected to remain the case in September. Employment grew by its fastest rate for 15 years in the year to August (a plus 38 per cent balance) and this too is expected to continue (plus 36 per cent) next month.

Against this backdrop prices went up (a balance of plus 14 per cent), and this is expected to remain the case in September, at plus 13 per cent. For the first time this year wholesalers also intend greater capital expenditure than in the previous 12 months, a healthy balance of plus 30 per cent.

John Longworth, Executive Director of Asda and Chairman of the CBI’s DTS Panel, said: “Conditions in August continued to be very tough for retailers and many fear the outlook is going to get worse before it improves, despite the recent interest rate cut.

“Some held earlier and longer summer sales despite margins already being very tight but there has been little sign in this survey of a response from consumers.

“The housing market slowdown continues to have a negative effect on many retailers, for example DIY and furniture chains, who have previously enjoyed the spin-off from the boom times."

The Distributive Trades Survey (DTS) covers 20,000 outlets of firms responsible for 40 per cent of employment in retailing. It includes measures of sales activity across the distributive trades. It was first introduced in 1983 and the retail results form the UK component of the EC survey of retail trades. The survey was conducted between August 2 and August 17 2005. There were 202 responses.

The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce.

Member companies, which decide all policy positions, include:
- 80 of the FTSE 100
- some 200,000 small and medium-size firms
- more than 20,000 manufacturers
- over 150 sectoral associations.

No other UK organisation represents as many major employers, small and medium-size firms or companies in the manufacturing or service sectors.

The CBI's broad-based membership gives it unrivalled influence with the UK government. The organisation is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms.

With offices across the UK as well as in London, Brussels and Washington, the CBI coordinates British business representation around the world.

CBI Press Office on 020 7395 8239 - or out of hours pager 07623 977854.