Thursday 6 January 2011 9:15 pm

Cost of snow hitting home

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BRITAIN’S economy took a hammering from the winter freeze, with the service sector contracting in December and retailers being hit, it was revealed yesterday.

The country’s largest sector experienced its first decline for 20 months, stalling the recovery. The business activity index, compiled by Markit and the Chartered Institute of Purchasing and Supply (CIPS), dropped to 49.7, down from 53 in November – below the 50 signalling contraction.

The news piled pressure on UK authorities to be better prepared for snow and severe weather.

“We are disappointed that the UK still hasn’t learnt the lessons from previous bad weather and that the country yet again ground to a halt,” said Federation of Small Businesses (FSB) chairman John Walker.

While the government ordered a review into the impact of the severe weather, this was the third in three years, the FSB said.

Companies usually prepare for and adapt to inclement conditions, but authorities are too often caught out, Walker argued.

Small businesses even come to the aid of local councils, Walker said, while an FSB survey showed that 17 per cent of companies bought their own supply of grit and salt.

Yet many retailers were severely hit by the conditions, blaming reduced sales on the coldest December since 1910, when records began.

High street giants Next, HMV and Mothercare saw year on year sales drop. Next suffered a 6.1 per cent drop in underlying sales in the 21 weeks to Christmas eve.

Mothercare’s results saw shares drop 6.6 per cent yesterday.

“It looks to have been the snow that caused the large decline,” said George Buckley of Deutsche Bank. “In the fifteen years that this survey has been published, in only six previous months have we witnessed such a large decline as this.”

The weather could have a “bigger impact” than in previous years, said Neil Blake of the Ernst & Young Item Club.