New year cheer for the High Street

LONDON'S economy started the year in good shape, with High Street spending bouncing and a rise in business activity.

The London Retail Consortium said big discounts in the January sales helped London stores recover after a poor Christmas. Like-for-like sales were 0.1% higher than a year ago after a 2.6% drop in December.

Meanwhile, the latest London purchasing managers' index from the Royal Bank of Scotland showed a flood of new orders propelled business activity growth to its fastest for 12 months.

The findings echo recent national surveys indicating Britain's economy has got off to a flying start in 2005. The housing market is stabilising, consumer confidence has bounced back and the huge services sector is powering ahead.

But all that has sparked worries that interest rates may need to rise to keep inflation at bay.

The LRC added a note of caution, saying High Street sales slowed in the second half of the month. LRC director David Southwell said retail margins remain under intense pressure and consumer confidence in the capital remains shaky.

London's headline business activity index in January rose to 60.1, from 59.8 in December. The national figure was 55.1.