Retailers call for interest rate cut

British retailers said last night they were facing a consumer-led recession as the slump in high street sales continued, and they called on the Bank of England to cut the cost of borrowing.

The British Retail Consortium said there was little change in the tough trading environment seen earlier in the year with shops having to resort to discounts and sales days to attract customers.

Like-for-like sales fell by 2.4% last month compared with the same period last year. For the three months ending in May, like-for-like sales declined by 1.5%. The cooling of the housing market meant that sales of big ticket and household items such as fridges and washing machines continued to suffer.

BRC director general Kevin Hawkins said: "These figures remove any lingering doubt that we are now in a consumer-led recession. There has been little or no improvement in any sub-sector of the retail industry and some are reporting a further deterioration. We urge the monetary policy committee to reduce interest rates at this week's meeting."

The Bank of England's MPC meets tomorrow and most economists believe it will leave rates at their current level of 4.75%. However, with the slowdown on the high street coming after declines in manufacturing and a cooling of the housing market, a cut later in the summer is widely predicted.

The BRC said yesterday that poor weather in May made life even tougher for retailers. The head of retail, Helen Dickinson, said: "Against a backdrop of a slowdown in consumer confidence, retailers would have hoped from a little help from the weather. There is no doubt that it really has im pacted trading this month."

Clothing and footwear sales worsened in May, with many retailers resorting to discounts and promotions to boost trade. Summer clothes and shoes did pick up over the warmer spells but shoppers spent their money on small items such as T-shirts rather than formal wear.

Clothing sales volumes were strong last year, according to official data, as stiff competition on the high street kept prices low. But clothing retailers are now suffering along with other shops, with consumers less willing to spend.

Shoppers' caution and the slowdown in the housing market continued to affect the sales of white goods such as washers, fridges and cookers although sales of large flat-panel televisions held up better than anticipated.