Think Tank predicts gloomy fourth quarter for retail

Retailers can expect the fourth quarter to be tough, with downward pressure on demand, margins and costs, according to the KPMG/SPSL Retail Think Tank.

It predicts that demand will continue to slow as consumers start to respond to increasing debt levels and growing credit constraints. The RTT points to significantly higher numbers of mortgage holders coming off their existing fixed-rate terms, mortgage and loan repayments as a percentage of income continuing to rise and a deterioration in the housing market.

Retailer margins will suffer as demand falls, believes the RTT, as stores are forced to discount more heavily, and it also predicts that China’s withdrawal of tax benefits to its exporters will impact on margins.

On the costs front, RTT members point to the development and servicing of the internet sales channel as adding another layer of costs while the size of the market remains the same. And in the run-up to Christmas additional costs will be incurred by postal deliveries and the rise in the National Minimum Wage at a time of extra seasonal recruitment.