LONDON British high street stores offered their biggest pre-Christmas discounts in at least seven years last month, industry figures showed on Wednesday, highlighting tough trading conditions despite an improving economy.
The British Retail Consortium said shop prices in early December were 0.8 percent lower than the same time in 2012, the biggest annual decline in any single month since the survey started in 2006 and the eighth consecutive month of falling prices.
The price slide reflects widespread discounting by British retailers in the run-up to Christmas. Although Britain's economy grew strongly in the first nine months of 2013, wages have stagnated and households have had to fund higher spending by cutting saving.
Research in mid-December by accountants PwC found almost three quarters of high street retailers had started sales or were advertising promotions in their shop window, such as three-for-two offers. It said average price discounts being advertised were 46 percent.
Major high-street clothing retailers Debenhams (DEB.L), Marks & Spencer (MKS.L), Gap (GPS.N) and French Connection (FCCN.L) heavily promoted pre-Christmas price cuts.
Only a few UK clothing retailers, such as Next (NXT.L) and SuperGroup (SGP.L), which have longstanding policies of not going on sale before Christmas, refrained from price cuts.
The BRC data showed that clothing prices in December were 10 percent lower than a year earlier.
The BRC's measure of shop price inflation does not include online retailers or costs such as energy, transport and housing, which feed into the broader official consumer price inflation (CPI) measure targeted by the Bank of England.
CPI has fallen sharply in recent months and touched a four-year low of 2.1 percent in November, but consumer prices are still rising more than twice as fast as wages - leading to claims of a 'cost of living crisis' from the opposition Labour Party.
The BRC said non-food prices fell by an annual 2.3 percent in December, just short of October's hefty 2.4 percent drop, while food prices rose by just 1.7 percent, their smallest increase since June 2010.
British retailers have reported a mixed Christmas in terms of sales, with some of the strongest performers being stores such as Next which did not discount.
The BRC publishes the first comprehensive Christmas sales data for the retail sector on Friday.
(Additional reporting by James Davey; Editing by Susan Fenton)