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Friday, 11 May 2012

Worsening Euro Crisis and the Impact on UK Retail

The news this week that Spain's fourth largest bank is going to need a bailout, Greece can't vote in a government and the rapidly worsening situation in the Euro' zone as economies struggle to repay debts is pretty grim. Strong economies such as Germany and the UK are feeling the pinch, retail sales have been down in Germany during the first quarter of this year with oil prices the hardest hit. Italy's economy is shakiest at best and being the worlds 8th largest economy would likely collapse the Euro entirely. Britain recently pledged a further £10 billion to the IMF which will hardly make a dint in the colossal debt most European countries are in.
Mervyn King Governor of the Bank of England this week warned that the Euro' crisis was far from over and urged the government not to lose sight of reforms to shake up the baking sector due to come in to force in 2014/ 2015, separating retail banking from riskier investment banking.  All this amidst criticism from Frances newly elected president Francois Hollande that the UK is only interested in maintaining London's financial sector interests.
Today the news that America's largest bank JP Morgan have surprise losses of £1.2 billion and could have more losses is already impacting on global markets and stock shares.
Clinton's Cards this  week also got pushed in to administration by its largest supplier. Already WH Smith, American Cards and the Card Factory are interested ...but  a buy out would potentially safeguard some of the 8,000 jobs at risk.

Amid all the doom and gloom it's no wonder consumer confidence takes a bit of a knock and retailers find it harder to stimulate consumer spending. Typically in recession consumer spending habits are quite dramatically affected. However the first quarter of 2012 retail has not been too negative, seeing retail outlets grow by 4.9% with a net increase of 858 shops. The number of retail jobs has also increased by 0.4% compared to the same period last year.
Stephen Robertson British Retail Consortium Director General said "The small increase in overall retail employment for the first quarter of this year is encouraging but it is clear from our return to recession just how fragile any growth is. None of these jobs can be taken for granted. Retailers are more positive about their immediate employment intentions than a year ago, but the GDP figures confirm 2012 will still be very tough for businesses and households. If it's to rekindle growth the Government should not be putting extra tax and regulatory costs on retailers or consumers."
Its going to be a tough old year but events such as the Jubilee, European Cup and Olympics should positively impact on sales and may well be just what keeps the wolf from the door for many retailers. We are certainly seeing an increase in installations of promotions around these events, especially for the Olympics as the retailers invest in making the most of the opportunities in 2012.

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