Plea for rate cut as shops struggle for custom

The UK's leading retailers' organisation called on the Bank of England to cut interest rates today after reporting yesterday that only a last-minute surge in spending on Christmas presents and a strong start to the winter sales saved shop takings in December.

Figures from the British Retail Consortium showed the pace of growth in consumer spending slowed to its lowest level for more than two years last month, with stores forced to cut prices to tempt buyers into the shops.

Total sales were 4.1% higher than in December 2001, although the BRC said much of the growth was down to increased floor space.

On a like-for-like basis, considered a better guide to the overall trend, the annual growth rate was 1.7%, well down on the 7.5% peak for 2002 reached in March.

The BRC said the December data was much as it had anticipated, with sales picking up in the final week following a slow start.

The late boost was caused by consumers taking advantage of the mid-week timing of Christmas day to buy last-minute gifts and then picking up bargains in the sales.

Bill Moyes, the BRC's director general, said: "Overall, the Christmas sales figures were slightly disappointing. Sales are growing, but at a much slower rate than over the last two years. The trend is downwards.

"If the Bank of England wants to see consumer spending continuing to grow at the moderate levels the governor wants, and that are needed by the economy, then they must signal this with a cut in interest rates."

Rate cuts and the boom in the housing market underpinned consumer spending last year, providing the mainstay of economic growth, but despite the downbeat message from retailers, and the continued plight of manufacturing, the Bank's nine-strong monetary policy committee is expected to leave interest rates at 4% today. They have been on hold since November 2001.