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New fears for economy as oil prices soar and high street sales slump
Hugo Duncan and Robert Lea23 May 2008
Concern mounted over the state of the economy today as the Government was hit with more bad news on a series of fronts.
Companies in the housing and retail sectors warned of growing problems and the price of oil showed no sign of falling in the near future.
Chancellor Alistair Darling is now facing the prospect of a "perfect economic storm" with the Treasury powerless to bring down oil prices which are fuelling inflation at the same time as growth stutters to a halt.
OIL
Oil hovered around record levels today threatening to push energy prices, petrol and business costs higher. Crude rose 44 cents to $131.25 a barrel having smashed through the $135 mark yesterday-before giving up some of its gains. The price has been forced higher by fears supply cannot keep up with demand and speculators looking to cash in. Experts reckon it will top $150 a barrel and could even hit $200.
It is causing misery for millions of households struggling to keep up with the rising cost of gas and electricity bills with all the major suppliers putting up prices this year. Household energy bills now cost more than £1,000 a year.
The rising oil price has also pushed up petrol prices with the average litre of unleaded at 113p. Industry is also feeling the strain. Airlines have been hit hard and are passing on some of the increased fuel costs to passengers.
RETAILING
Sales at Harvey Nichols have fallen as the economy slows. It has reported falls of between 4 and 6 per cent at its regional stores in April while growth at its Knightsbridge store has slumped to 2 per cent - a fall in real terms when considering inflation - from previous growth rates up to 7 per cent.
Chief executive Joseph Wan blamed the sales declines on the introduction last month of the non-dom tax clampdown on foreigners living in London.
Mr Wan, himself a non-dom heir to a family fortune, said: "I can't believe this tax change. It is preventing or reducing the ability to invest in this country."
The fall in sales at Harvey Nicks coincides with the worst credit crisis in a generation in the financial markets which has led to a marked slowdown in consumer spending.
HOUSING
Britain's largest landlord has put two major housing developments in London on hold as it prepares for a slowdown in the property market.
Grainger delayed the two schemes and cut back on development elsewhere as it warned of "unquestionably difficult" times ahead.
Chief executive Rupert Dickinson said house prices were falling because of the shortage of buyers and the cut back in mortgage lending. Housebuilder Bellway Homes has axed 370 jobs bringing the total number of job losses in the housing sector over the past week to 1,000.
Reader views (1)
Oil price should and will keep rising - $300 a barrel would be nice.
- James Mclean, Falkirk UK, 23/05/2008 15:23
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