Retail consumer spending growth is likely to drop to 2.6 per cent this year, compared with 3.7 per cent in 2007.

Electricals is likely to show the strongest growth, while music and video will again be the worst performing category, according to retail research company Verdict.

Retail spend in 2008 is expected to reach£289 billion, but retailers will have to be on their mettle to claim their share, warned Verdict consulting director Neil Saunders. He said the spending forecast was more likely to be revised down than up.

Only 27.5 per cent of the total – or£79.4 billion – is classified as essential spend. The biggest proportion, 56.8 per cent – or£164.2 billion – counts as “indulgent” expenditure and is most at risk if jittery consumers stay away from stores.

The challenge for retailers will be to give shoppers “compelling” reasons to buy, said Saunders, by adding value through factors such as increased customer focus.

Saunders feared that more retailers would hit the buffers as tough trading conditions persist in 2008. “We’re probably going to lose some larger names as well as small,” he said.

This year’s winners and losers forecast
Sector 2008 growth 2007 growth

Electricals +4.1% +4.2%
Health & beauty +4% +4.4%
Homewares +3.2% +3.4%
Food & grocery +3.2% +3.9%
Clothing +3% +3.9%
DIY +2.2% +3.1%
Furniture & flooring +2.2% +2.6%
Music & video +1% +0.2%