Health of high street improves in tough conditions

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Retail Health Index registers Q4 improvement, but 2010 remains tough.

The British high street emerged from recession in the fourth quarter of last year, and will continue to strengthen this quarter, according to the latest Retail Health Index from KPMG/Synovate Retail Think Tank (RTT).

However, a senior member of RTT warns that there are dark clouds gathering on the horizon that could create more turbulence for the sector and cause a retail relapse.

Writing in The Times, Vicky Redwood, UK Economist at Capital Economics and a member of the KPMG/Synovate Retail Think Tank, said recent house price gains could be reversed, unemployment could increase and taxes could rise following the general election. “All of these could bring to an end the resilience in retail spending and the start of a period of retrenchment,” she said.

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The level of consumer debt is also a potential problem. While the Bank of England base interest rate remains low, households are managing to service their borrowings, but even the fear of future rate rises could push people to focus more on paying down debts ahead of spending on the high street.

“The RTT believes that the situation is more of a bumping along the bottom of the recession cycle than real recovery and the delicate confidence that has returned could easily be shattered,” Redwood warned.

“There will be no room for complacency,” Redwood continued. “Successful retailers this year will be doing two things: continually adapting to changes in consumer behaviour and lower levels of demand by finding new and innovative ways to exploit opportunities; and maintaining a clear focus on business strategy, with a robust plan in place.”

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