How will a coalition government affect retail?

New PM David Cameron and Liberal Democrat leader Nick Clegg pose outside Number 10. (Photo by Matt Cardy/Getty Images)

Will it be 80s opulence, VAT rises or free apprenticeships?

Last night was a historic evening for Britain as David Cameron got the nod from the Queen to become the new Prime Minister and announced that the Conservative Party would form a coalition government with the Liberal Democrats.

The retail sector, along with the rest of Britain, has been waiting for the outcome of the political uncertainties that have characterised the past weeks since the announcement of a general election. The British Retail Consortium director-general Stephen Robertson noted in the BRC-KPMG Retail Sales Monitor yesterday that political uncertainty is still causing shoppers to hold back from spending on the high street. And with a coalition government we’re not much closer to getting answers.

Personal preferences aside, a Tory government could be good for retail and the industry has always favoured the Conservatives over Labour in general. In its manifesto, the Conservatives promised to scrap part of Labour’s proposed 1 percent increase in National Insurance contributions, said it would give more power to local councils to veto the development of new shopping complexes which would please independent retailers, help struggling businesses by providing diverse sources of affordable credit, allow local councils to keep hold of business rates and take a strong stance on retail crime.

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The bad points? The Conservatives have never been shy to admit that there will be massive cuts in public spending and let’s not forget that they have never quashed talk of a rise in VAT to 20 percent.

But this is a coalition after all, and the Liberal Democrats will have some sway, although how much is not clear yet. While all three main parties tried to visibly align themselves with retail during the campaign, the Liberal Democrats perhaps have the strongest plans laid out to aid the retail sector.

In their manifesto the party pledged not to raise VAT, which could force the Conservatives to abandon a move to ramp up the tax to 20 percent, and are staunchly against a rise in National Insurance. The party also wants to reduce the red tape preventing banks from lending, invest £900 million in apprenticeships that won’t cost employers to train up young people, laid out plans to reform business rates to help support independent retailers by extending Empty Property Relief and increasing rates for the biggest businesses in the country.

Locally, the party pledged to safeguard independent retailers against large supermarkets by requiring local planning authorities to prove that an area needs the development. It also wants to extend this to other areas of retail with all new retail developments required to prove that they would be beneficial for the local community.

What the outcome of this mish-mash of policies will be remains to be seen, but one diamond retailer is more than pleased by the introduction of Cameron as the new PM. Andrie van der Luijt of online diamond jewellery retailer Diamond Manufacturers is expecting the conspicuous consumerism of Margaret Thatcher’s 1980s to return to power along with the Conservative party.

He says: “David Cameron is a very different person from Margaret Thatcher and the economic circumstances are very different. We may well see a return to more focus on personal achievement and personal responsibility. If that is the case, we expect that consumers will want to wear their success on their sleeve once again.

“With iPads, laptops and iPhones widely accessible at a low cost, we probably won’t see a return of the latest gadgets as status symbols. Diamonds, with their unique and individual qualities, fit in perfectly with the new zeitgeist, however, and we expect to see a new surge in their popularity.”

Wishful thinking, perhaps. With a massive deficit looming over the country, the new government has a lot of work to do and it’s doubtful that the economy will spring back into action immediately, let alone revive 1980s “undreamt wealth, rampant consumerism and champagne-fuelled opulence” as Van der Luijt puts it.

But with two parties in power with firm plans for retail, the new coalition might not be such bad news for the retail sector.

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