The High Street hangover: Heavy discounts fail to entice shoppers into splashing out as spending falls in both shops and on the web

  • Mail and telephone order also fell 3% year-on-year
  • Consumer spending hasn't recovered since 2007
  • Shares in Tesco and Sainsbury's fall on opening of stock market
  • Rolls-Royce bucks the trend thanks to sales in China
  • HMV like-for-like sales falls but technology purchases rises by 51 per cent

Carnaby Street in Central London was crowded, but heavy discounts failed to bring an expected boost in spending

Carnaby Street in Central London was crowded, but heavy discounts failed to bring an expected boost in spending

Spending on the High Street fell over Christmas despite heavy discounts designed to entice us into parting with our cash.

Many sales started before Christmas, but the amount we spent both in shops and online tumbled on a monthly and yearly basis.

Even the amount spent over the festive season on food, alcohol and tobacco fell by 5.3 per cent while spending on transport and communication also saw an annual decrease of 5.8 per cent.

Overall spending fell by 1.1 per cent month-on-month in December and by 0.8 per cent when compared with the same period in 2010.

Those behind the survey said the monthly drop reflected recent volatility as consumers become very cautious amid an uncertain economic backdrop.

Mail and telephone order spending saw a 3 per cent year-on-year decline, while face-to-face spending decreased by 1.4 per cent and online spending saw a more modest annual decline of 0.4 per cent.

This is the first time in two-and-a-half years that a year-on-year decline has been recorded for all three of these methods.

Consumer spending has not recovered since a peak in 2007, those behind the survey said.

Visa’s UK Expenditure Index uses spending on its cards as a base, but the figures are adjusted to reflect overall consumer spending, not just that on Visa cards.

Chris Williamson, chief economist at Markit, which compiles the report, said: 'A 1.1 per cent drop in consumer spending in December caused expenditure to fall 0.9 per cent over the fourth quarter as a whole.

'With the consumer accounting for approximately two thirds of all expenditure in the economy, the downturn clearly adds to worries that the UK may be sliding back into recession.

'The data also highlights the plight that retailers have suffered over the key Christmas trading period, with even online sellers not immune to households’ increasing reluctance to spend.'

Heavy discounts caused a rush at shops like this Selfridges on Oxford Street, London. but consumers are becoming more savvy and cautious about spending

Heavy discounts caused a rush at shops like this Selfridges on Oxford Street, London. but consumers are becoming more savvy and cautious about spending

Despite several sectors seeing a decline over the year, hotels and restaurants saw the biggest boost, with 12 per cent growth in spending, while the clothing and footwear sector recorded a 6.7 per cent rise.

Dr Steve Perry, commercial director at Visa Europe, said: 'Against a backdrop of challenging economic circumstances, consumers’ uncertainty translated into subdued Christmas spending, despite heavy discounting both on the high street and online.

'It is clear that consumers have become increasingly savvy and cautious about where they choose to spend.'

Share prices in Tesco and Sainsbury's fell this morning amid further evidence of subdued retail demand.

Tesco slipped 1.9p to 389p while Sainsbury's shed 0.3p to 298.5p. They will report figures later this week with Tesco expected to post one of its weakest Christmas trading periods in several years.

Among the larger brands that reported slowdowns were Morrisons and HMV, underlining the fierce competition in both sectors.


Luxury car company Rolls-Royce had a record year in 2011, it was announced today.

The Sussex-based company sold 3,538 cars worldwide last year - 31 per cent more than in 2010 and more than the previous record year of 1978 when the figure was 3,347.

China was the company's biggest market last year, followed by the United States and the UK, where there was 30 per cent growth. Chinese markets made up a large part in the growth of Rolls-Royce last year

The record sales follow the announcement last September that Rolls-Royce intends to expand its manufacturing plant at Goodwood in West Sussex. Work on this will begin next month.

'We had an outstanding year in 2011 and we should take a moment to reflect on this great British success story,' said Rolls-Royce Motor Cars chief executive Torsten Muller-Otvos.

'Our business is in excellent shape.

'We are developing our dealer network, moving into new markets like South America, expanding our manufacturing operation in West Sussex to meet global demand and have plans to develop our product range.

'At the core of this extraordinary success is a dedicated, committed and, above all, passionate workforce.'


JD Sports Fashion today confirmed it is close to landing 'certain assets' of the ailing retailer Blacks Leisure.

The company, whose largest shareholder Pentland owns the outdoor brands Berghaus and Brasher, has reportedly offered £20m for most of the 300 Blacks and Millets stores.

However, it is not expected to want the company’s warehouse and head office. JD Sports is close to landing 'certain assets' of ailing retailer Blacks Leisure

JD confirmed it is in advanced discussions over an offer for certain assets and said a further announcement would be made on conclusion of the talks. It also said it would retain many of Blacks’ 3,500 staff.

The deal is likely to be as part of a pre-pack administration, when a company emerges under new ownership following a pre-arranged sale. The process is viewed as controversial because creditors do not have the opportunity to vote against the proposed asset sale.

JD is thought to have beaten Dragons’ Den star Peter Jones, rival Sports Direct, which is owned by Newcastle United owner Mike Ashley, and outdoor retailer Trespass to land the stores.

Bury-based JD currently has around 350 JD Sports outlets in the UK.

The supermarket reported a slowdown in sales with like-for-like sales excluding VAT and fuel increase 0.7 per cent in the seeks weeks to January 1.

That compares with 2.4 per cent in the previous quarter and is lower than the City's expected growth of one per cent.

The slowdown came despite Morrisons, the fourth biggest supermarket in the UK, claiming a record number of customers, with an extra 800,000 per week shopping there during the period.

The battle for sales gathered pace in early October when Tesco introduced its Big Price Drop, prompting Sainsbury’s to launch a price-matching scheme and Asda to slash petrol prices.

HMV, which owns 252 stores in the UK, said its plans to shift focus to technology products, by refitting stores with an extended gadget range, saw group like-for-like sales fall 8.1 per cent in the five weeks to December 31.

But in the 144 stores refitted with an increased range of portable digital products, like-for-like technology sales were up 51 per cent.

Morrisons reported a slow-down in pre-Christmas sales showing the fierce competition in the supermarket sector

Morrisons reported a slow-down in pre-Christmas sales showing the fierce competition in the supermarket sector

HMV has increased its range of portable digital products to mitigate for falls in music sales

HMV has increased its range of portable digital products to mitigate for falls in music sales

HMV, which recently sold bookseller Waterstone’s and announced plans to sell its live music division, repeated its warning that there were 'material uncertainties' which may cast doubt on the group’s ability to continue.

Freddie George, a retail analyst at Seymour Pierce stockbrokers, said the update was marginally better than expected.


An Arabian retail group is poised to buy part of high street lingerie chain La Senza, its owner said today.

Alshaya, which owns stakes in a number of British retailers including Next, Debenhams and Mothercare, is in advanced talks to buy part of the business - understood to be 60 stores - as part of a pre-pack administration deal.

Around 80 shops remain under threat of closure after La Senza, which is owned by private equity firm Lion Capital, announced its intention before Christmas to appoint an administrator, which is now expected to be KPMG.

As well as tough trading conditions, the chain has been weighed down by leases agreed by sister lingerie chain Contessa with which it merged in 2007.

A spokeswoman for Lion Capital said: 'We can confirm that Alshaya, a leading international retail franchise operator, is in advanced discussions with La Senza regarding a potential acquisition of part of the UK La Senza business.'

Theo Paphitis, Dragons' Den star and former owner of La Senza, disclosed the pending deal on his Twitter feed over the weekend.

He said: 'Good news and bad news re @LaSenzaUK heard that Lion has done a deal to sell the business with about 60 shops to Alshaya group.'

He added: 'The bad news re @lasenza is that the other 80 shops will be closed down or put in the hands of Admin KPMG with resulting job losses.Sad!'

But chief executive Simon Fox added: 'Undoubtedly trading conditions and the consumer environment remain challenging, but we remain confident in HMV’s future prospects.'

He added: 'It is encouraging that the HMV Retail business has seen an improvement in trading although the like-for-like sales were still negative.

'We remain concerned, however, that net debt levels are high at £160 million following the disposal of Waterstone’s and HMV Canada.'

Elsewhere, HMV reported a 9.7 per cent decline in group like-for-like sales in the nine weeks to December 31.

The group said its previously announced strategic review of HMV Live, which runs 13 venues and a number of festivals including Lovebox in London and Global Gathering near Stratford-upon-Avon, was making good progress.

The chain has felt the pressure of the consumer spending squeeze as cash-strapped customers turn to cheaper deals on the internet for music and film.

HMV disclosed a bottom-line pre-tax loss of £45.7 million in the 26 weeks to October 29, compared with £27.4 million the previous year, while like-for-like retail sales fell 13.2 per cent in the seven weeks to December 17.

The group previously announced the closure of up to 40 stores in a bid to make millions of pounds of cost savings, with 15 shut in the first half of the year.

Meanwhile, the sale of Waterstone’s and HMV Canada raised the group £55 million and ensured a £220 million refinancing deal with its lending banks.

HMV was the first of many retailers to report this week on their performance over the Christmas break with Marks & Spencer, Argos owner Home Retail Group, chocolatier Thorntons and supermarkets Tesco and Sainsbury all publishing updates.