Stay-at-home spending helps consumer firms

By @ibtimes on

Cash-strapped Britons are staying at home more, watching TV and gambling online, updates from consumer-facing companies showed Thursday, as fears grow that the UK will slip back into recession.

The economy has barely grown over the last 12 months, unemployment has started to rise again and consumers are seeing their disposable incomes squeezed by rising prices, subdued wages growth and government austerity measures.

Cable pay-TV group Virgin Media , like its fierce rival BSkyB , said it had maintained financial and customer growth by focussing on cross-selling additional services. Customers were paying a record 48 pounds per month to take a range of services.

It's pretty tough out there, we're at the coal face in terms of the consumer downturn and we don't see it getting any better any time soon, Finance Director Eamonn O'Hare told Reuters in an interview.

He said television and broadband were among the last things consumers wanted to sacrifice.

So what we're seeing increasingly is that people are going to the supermarkets, buying food and going home and watching telly. So that means our business is pretty robust in the face of tough times out there.

Britain's biggest bookmaker William Hill provided more evidence of a stay-at-home culture, reporting a 28 percent rise in online gambling revenue in the third quarter, in contrast to a 3 percent decline at its retail business.

Chief Executive Ralph Topping said the company had performed well considering how difficult the economic environment had become.

It's a solid performance, you may even class it as a good one when you factor in how competitive it is out there and how tough our customer is finding it, he told reporters.

Betting shops have traditionally been more resilient than other retail businesses during hard times, reflecting the habitual nature of gamblers and the average bet staked being relatively low at under 10 pounds.

One worker at a betting shop in London owned by a well-known UK-listed gambling firm, told Reuters that gamblers were cutting back the amount of money they stake.

We are getting the same people but the stakes are getting lower, he said. Everyone is trying to save money.

In contrast to the resilience shown by Virgin Media and William Hill, nightclub operator Luminar went into administration Wednesday after banks refused to extend a waiver period of covenants on a loan.

The company had issued profit warnings as youth unemployment and the wider squeeze on consumer spending kept would-be clubbers at home.

GOOD CHANCE OF DOUBLE DIP

Bank of England policymaker Paul Fisher said Thursday there was a good chance that Britain could suffer another recession and that more asset purchases could be necessary after the current round is completed.

A recent survey by retailer Asda said British families were about 60 pounds a month worse off than a year ago as rising energy, motoring and food costs eat into finances.

Most Britons think the government has done a bad job with the economy since it was elected in May last year but few think opposition Labour's Ed Miliband and Ed Balls would do better, according to a Reuters/Ipsos MORI poll on Thursday.

With British retailers generally struggling there was little to buoy the sector in the latest survey by the Confederation of British Industry.

Although the CBI data showed the decline in British retail sales eased off in October, the underlying trend remains weak.

A monthly survey for the European Commission showed that consumer confidence in Britain fell further in October, hitting the lowest level since April.

Last week household goods retailer Argos posted a 94 percent slump in first-half profit, while Tuesday Carpetright , Britain's biggest floor coverings retailer which is suffering from a stagnant housing market, warned on year profit.

Thursday, struggling British cards and gift retailer Clinton Cards posted an 83 percent slump in year profit, hit by a combination of low consumer confidence and intense competition from supermarkets and the Internet, while outdoor goods specialist Blacks Leisure posted wider losses.

British-based car dealer Inchcape said that although its UK business suffered from a further weakening of consumer confidence in the third quarter, it outperformed the industry, winning market share in the luxury and premium segments. It said UK demand for used cars and aftersales remained robust.

($1 = 0.628 British Pounds)

(Additional reporting by Kate Holton and Naomi O'Leary; Editing by David Cowell and Erica Billingham)

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