?Mixed blessing for UK retailers? says analyst
The pound has continued to rise against the US dollar, now above US$2.01 - the highest rate since June 1981.

The currency passed the US$2 figure yesterday, after unexpectedly high UK inflation figures.

The Consumer Prices Index (CPI) hit a record 3.1 per cent in March, according to the Office for National Statistics. This latest increase is expected to prompt a further rise in UK interest rates.

The Bank of England has raised UK rates three times since August last year in an attempt to contain inflationary pressures.

Ernst & Young director of retail Tim Sleep said: 'Having broken through the US$2 barrier to reach a 26-year high, the strength of the pound against the dollar signals mixed blessings for UK retailers.

'On the one hand, most retailers stand to make some gains from cheaper sourcing, given that the majority of products are bought from the Far East in dollars. However, it is highly likely that retailers will invest any savings in selling products at lower prices, in view of the intense level of competition on the UK high street.'

Sleep said that in terms of consumer shopping habits some retail brands, particularly at the luxury end of the market, could suffer from any decrease in spending by US tourists. And some hard-core bargain hunters might be more tempted to buy online from US sites, given the potential savings on offer - not to mention the inevitable increase in trips to New York by UK shoppers in search of a good deal.

However, on the corporate front the strong pound offers a degree of protection to takeover from overseas predators. Sleep said: 'And, who knows, as retailing becomes ever more international, UK retailers on the expansion trail might even be tempted to cast an eye over potential acquisitions in the US.'