The current retail downturn is not simply a temporary side-effect of the recession but the mid-point of a lengthy reform of the retail market, according to new research.

Ultimately 2008 will be remembered as the beginning of a substantial contraction of a sector that had become bloated with over-capacity and buoyed by rocketing house prices, cheap credit and massive space growth, says Verdict Research in its latest UK set of forecasts to the year 2013.

Verdict Research is predicting just 8.1 per cent growth in the UK over the five years to 2013, a massive drop from the increase of 14.1 per cent in the same period to 2008.

Verdict predicts survivors will find themselves in a far less competitive environment, with major opportunities for market share gains and winning new customers.

Verdict believes the downturn will be a prolonged affair and 2009 will be the year in which the market is at its weakest, with the first negative growth since Verdict Research’s records began way back in 1984.

Total UK retail may decline by 0.6 per cent, or £1.7bn, while non-food spending will decline by three per cent.

The fundamental driver of this performance will be the UK’s economic circumstances. Spending ability will weaken, despite the food and utility bills inflation of 2008 dropping away throughout the year, as consumers' disposable income will become increasingly pressured by slowing wage growth. Moreover, for many, any disposable income will go into savings and paying off debt.

Malcolm Pinkerton, senior retail analyst at Verdict and author of the report, said the main driver of the decline, however, will be rocketing unemployment. He said: “Unemployment will not peak until late in 2010, as cutbacks continue to spread outwards from the financial sector, in which the credit crisis began, to affect all areas of the UK workforce. Both actual unemployment and the looming threat of it act as the ultimate dampeners to consumer spending, so the worst is truly yet to come.”

Verdict is predicting a return to positive GDP growth in 2011.

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