The retail sector saw sales drop $40 million in 2009 and things are not expected to turn around until October this year.

Chamber of Commerce retail spokesman Kristi Grayston said shops were hoping sales would pick up in the fourth quarter of 2010. And Finance Minster Paula Cox said the decline in sales was expected due to the recession, but the Island could expect "likely policy changes" in next week's Budget.

December, normally buoyed by Christmas shopping, had a five percent reduction in the volume of goods sold when inflation is taken into account, according to the Retail Sales Index issued by the Department of Statistics yesterday.

It was the 11th consecutive month sales were down, with January being the only month that saw a growth in sales last year. But when inflation is taken into account it was actually the 21st straight month where stores have not seen a growth in sales.

In 2008 the estimated total retail sales on Island were $1.13 billion. Last year that figure dropped to $1.09 billion.

It was the first year that sales did not increase year-on-year, since 2003.

The $40 million loss in sales has resulted in some people losing their jobs or having hours cut, Mrs. Grayston said.

Shopkeepers across Hamilton yesterday said they were cutting back hours or imposing a wage freeze in order to survive the economic downturn. Many who spoke with The Royal Gazette said they were trying to hold onto staff.

"Currently hours are being cut back for many employees," Mrs. Grayston said. "But we are hopeful that things will turn around in the fourth quarter this year.

"This year we anticipated the lack of sales, which means many shops have not been left with large amounts of stock. We thought Christmas 2007 was bad but we had no idea how much worse it was going to get."

Mrs. Grayston said she did not know what the Budget would bring for retail.

Some have suggested that raising import duty for shop owners would help the Government raise revenue. The tough economic climate has seen the Country's debt rise dramatically in the last two years.

"Finance Minister Paula Cox is in a tough spot," she said. "We have made our usual presentation to her and she understands our position but I don't know what will happen."

"I would find it unlikely that she will raise import duty for shops. I think we have seen that when we raise duty for certain items it actually reduces revenue. When they raised duty for boats the flow of boats to the Island stopped. When they lowered the duty people began buying boats again and revenue increased [from import duty]."

Recently the retail sector made a presentation to the Minister of Finance looking at ways to level the playing field without cutting into Government's revenue. Mrs. Grayston said the Finance Minister was aware of the issues facing retail but added she was uncertain if shop owners would see import duties fall a move that would provide them with welcome relief.

Yesterday the Finance Minister said the decline in retail sales was "consistent with the state of the economy", which was in recession in 2009. She added: "Prospects for the future and likely policy changes will be uncovered in the 2010-2011 National Budget on 26 February 2010."

Bermuda Democratic Alliance MP Shawn Crockwell said tough decisions will have to be made.

"We have seen stores in St. George's and Hamilton close and now the Esso in Warwick," Mr. Crockwell said. "This should give us some cause for concern. The Government need to come up with creative ways to assist retailers."

But Mr. Crockwell feared that Government "wastages" on items such as travel meant it would be unable to provide the relief that some sectors needed, particularly the retail sector.

"It looks as though Government is not living within the current economic realities," he said. "They are not responsible for the global economic recession but they are responsible for fiscal prudence. They are in a position now where they probably cannot provide any help [to retail]."

He added it would be unwise for Government to increase import duty for the retail sector as a way to increase its revenue: "We hope they do not raise import taxes, that would be a death knell for retail."

United Bermuda Party Finance spokesman Bob Richards said the party sympathised with retailers. "Unfortunately, things are not likely to get better soon given the shrinking construction sector, the slowdown in international business and the continuing fall in tourist numbers, which has seen $200 million fewer dollars spent on the Island since the third quarter benchmark results of 2008," he said.

"Our best advice in the immediate term is for retailers to put the strongest possible emphasis on customer service. We know Bermudians continue to spend overseas and it is possible that as the recession continues that market can be lured back into our stores."

Last year residents spent $89 million overseas.