Squeezed Britons avoid hotels, car trips

A man walks past a Costa Coffee branch in Loughborough, central England June 17, 2008.

Credit: Reuters/Darren Staples

By Matt Scuffham and Philip Baillie

LONDON | Tue Dec 13, 2011 10:02am EST

LONDON (Reuters) - Cash-strapped Britons are cutting back on hotel stays, switching from cars to public transport and avoiding home improvements to save money as recession fears bite, updates from consumer-facing companies showed on Tuesday.

Britain's economy has barely grown over the last year, unemployment has risen and spending power is being squeezed by rising prices, subdued wage growth and government austerity moves.

Whitbread (WTB.L) had been a resilient performer throughout the economic downturn, with its budget Premier Inn hotels proving popular with business and leisure customers and drinks at its Costa Coffee chain regarded as an "affordable luxury".

But the company on Tuesday reported a sharp fall in sales growth at both, blaming the slowdown on the grim economic outlook.

Whitbread said it was focusing on cut-price meals at its pub restaurants, including an all-you-can eat buffet in Brewers Fayre for 5.99 pounds and meals for under 5 pounds at Beefeater.

"I would say this is a reflection of the general economic climate," Chief Executive Andy Harrison told reporters.

The bleak assessment coincided with a government report into town centre shopping which said a third of British high streets are degenerating or failing and, by 2014, less than 40 percent of retail spending will be on the high street.

"We are now at crisis point," said the report's author, retail consultant Mary Portas.

"Town centre vacancy rates have doubled in the last two years and for the first time in history over 50 percent of total consumer spend is now off the high street," she said.

Portas noted that one in six shops is vacant and recommended boosting occupancy by relaxing planning laws and giving a property tax rebate to small businesses.

British retailers last month posted their biggest annual fall in like-for-like sales since May, as widespread discounts failed to lure pre-Christmas shoppers.

Britain's biggest floor coverings retailer Carpetright (CATVU.L), which has issued a string of profit warnings, on Tuesday reported its worst first-half results in 18 years as a listed company.

It has been particularly hard hit by a stagnant housing market and cutbacks on large purchases that can be deferred.

Rail and bus operator Go-Ahead (GOG.L) said full-year profit would exceed expectations because passengers were turning to public transport to avoid the high cost of running cars.

"This demonstrates the resilience of public transport during challenging economic times as passengers seek convenient and value-for-money alternatives to the private car," Go-Ahead's Chief Executive David Brown said in a statement.

Offering some relief to consumers, UK inflation eased in November for a second successive month, chiming with Bank of England forecasts and bolstering expectations the central bank will have scope to provide additional stimulus to the sluggish economy next year.

Slower growth in food, transport and clothing prices helped push down annual consumer price inflation to 4.8 percent, the Office of National Statistics said on Tuesday.

British consumer confidence edged up slightly in November but was still close to a two-year low.

Earlier in December, Britain's biggest retailer Tesco reported a drop in underlying British sales for the fourth quarter in a row while clothes retailer Peacocks went into administration.

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