Any signs of green shoots on the high street are unsustainable and a lasting recovery may not emerge until 2011, according to credit ratings agency Fitch.
The assessment is in stark contrast to some retailers that have revealed upbeat trading figures in recent weeks, such as Next, which reported a 1.2 per cent increase in overall sales between May and June.
But according to Fitch, any recovery is only temporary because of the boost from Easter, the good weather and the early Sales that many chains are embarking on.
Because of these sales, Fitch points out, margins are being squeezed, and shops may find it hard to cut back in their number of promotions as shoppers come to expect price cuts.
Retail and consumer analyst Ching Mei Chia said: “Rather than signalling an economic recovery, the recent better-than-expected trading results have been boosted by temporary factors such as weather and early aggressive promotional activities and clearance sales.”
Fitch added that retailers may have tied themselves in knots with the early sales, which left margins squeezed and firms backed into a corner to keep promotions or suffer shoppers looking elsewhere after becoming accustomed to price cuts.
Chia said: “Consumer spending will be constrained through 2010, likely delaying a lasting recovery for UK retailers into 2011.”