High Street sales have seen their worst dip since records began in 1995.
The British Retail Consortium (BRC) said that total sales in March slid by 1.9 per cent compared with a year ago.
For the same period in 2010, sales rose by 6.6 per cent, helped by an early Easter.
On a like-for-like basis, which removes from the calculations the effect of stores that have been open for less than a year, sales were 3.5 per cent lower as opposed to a 4.4 per cent increase 12 months ago.
The figures highlighted the continuing fragility of consumer confidence as households battle with the first real decline in disposable incomes since 1981.
Non-food, non-store (internet, mail-order and phone) sales growth slowed in March. Although sales were 7.5 per cent higher than a year ago, the increase represented the smallest rise since October 2008 and much weaker than the 10.4 per cent recorded in February.
Stephen Robertson, director general of the BRC, said: “This is the worst drop in total sales since we first collected these figures in 1995. Non-food retailers were particularly hard-hit. This is strong evidence of the pressure customers and traders are under. This year’s later Easter is a factor but this fall goes way beyond anything that can be explained by that alone.
“Uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for thirty years. Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to. These pressures aren’t going away and the arrival of higher national insurance is likely to compound them in the immediate future.
“The next interest rate decision is a difficult balancing act for the Bank of England but, for now, supporting our weak economy must be the priority. Inflation is coming mainly from temporary and external price shocks – VAT, world commodity prices and the weak pound – not wage or consumer-driven increases. Increasing interest rates would do more harm than good.”
