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Two weeks in the UK - Fight for survival

As the pace accelerates towards Christmas there has been yet another fortnight of extremes for UK retail as it attempts to see whether this season will bring joy or tears for their sector.

Last week the shocks came from the electrical sector with the announcement by Carphone Warehouse that it was to close all the eleven stores it had opened in a joint venture with US giant Best Buy, closely followed by the news that Comet had been sold for a mere £2.

Best Buy’s UK market entry had been much trumpeted as set to change the face of electrical retailing here.

Instead its exit has shown just how wary retailers should be of making such bold claims when entering a market that was already well served and especially of making such boasts early – giving its rivals a chance to sharpen up their acts first.

This week it has been Mothercare that has suffered, with the revelation of an underlying loss of £4.4m at group level in the first half compared to profit of £12.2m last year, and the announcement of a UK business review.

It's boss Ben Gordon left following the announcement although his departure was announced earlier in October. French Connection also announced a significant fall in like for likes at its fashion business as shoppers tighten their belts.

But its little surprise shoppers are being more prudent. The past fortnight has seen increased trepidation about the economy with consumers bombarded with various hard-hitting headlines from the news that youth unemployment had hit one million to fears over the stability of the EuroZone.

There were some glimmers of hope. 

The latest ONS figures showed that inflation fell in October by 0.2 percentage points across both the Consumer Price Index (CPI), and the Retail Price Index (RPI), down to 5% and 5.4% respectively.

They had matched the previous highest ever levels last month. Supermarket price wars helped push food prices down which was one of the biggest factors for the change.

Figures published the previous week by the British Retail Consortium had showed supermarket price wars had a downward pressure on its own Shop Price Index, which was down by 0.6 percentage points.

Meanwhile October retail sales, according to the ONS, were up 0.9% by volume from the previous month thanks to pre-Christmas offers and instore promotions according to the official body.

It claimed the value of sales in the month was up 5.4 per cent year-on-year and 0.7 per cent month-on-month.

The picture may be a little mixed but the high street inevitably remains a tough place as consumers try hard to balance budgets this Christmas but as ever it seems discounts will be key.

Debenhams kick-started the Christmas promotional battle this week with the launch of its five day, up to 40% off, Christmas Spectacular Sale and its rivals are set to follow suit with some retail analysts predicting price cuts of double that before Christmas and Sales beginning from the second week of December.

Which retailers survive the frenzy will become clearer over the next few weeks.

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