Political uncertainty fuelled by Brexit, events in Europe and a new US President, mean retail growth in Britain will stagnate in 2017 according to the KPMG/Ipsos Retail Think Tank (RTT).
The RTT members predict that in the current political environment and with UK consumer price inflation set to rise to 2.5 – 3% next year, any growth in non-discretionary retail will be offset by a decline in discretionary spend, resulting in an overall retail growth figure of 0.5% in the year.
RTT co chairman and UK Head of Retail at KPMG, Paul Martin, said: “From a macroeconomic perspective, 2016 was a positive year with the UK delivering what is set to be an impressive 2.1% growth in GDP. However, the year is not likely to be remembered for this fact but rather the UK’s decision to leave the EU; the election of the new President of the United States, and the repercussions these events may entail for the years to come.”
“You could argue that the ‘Great British’ consumer has broadly ignored the results of the Brexit referendum, with consumer spending continuing to grow over the final months of the year,” he added.
James Knightley, Senior UK Economist at ING, said: “The strength of the economy following the Brexit referendum has surprised many, but we must remember that Article 50 is still to be triggered. Scheduled to happen before the end of March, it will coincide with Dutch elections and possibly Italian elections, whilst French Presidential election campaigning will be in full swing.”
With the coming year awash with political uncertainty, Jonathan De Mello, head of Retail Consultancy at Harper Dennis Hobbs said the outlook for 2017 could be summarised as one of concern.
Rising consumer price inflation, increased costs to retailers, diminishing consumer and business confidence, as well as political uncertainty, were among some of the central themes worrying the RTT members most. Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance, highlighted that these will add: “…to considerable challenges already in train for the next year from the National Living Wage programme and the revisions to business rates.”
However, it was not all ‘doom and gloom’. Whilst sharing the RTT’s concerns, Martin Hayward, Founder of Hayward Strategy and Futures, stressed that: “The sky didn’t fall down in 2016, and it won’t in 2017.”
Meanwhile, Martin Newman, CEO at Practicology, added that: “The industry will undoubtedly have a tough ride next year but if retailers can be agile to respond, then there are opportunities to ensure that they at least survive, if not thrive.”