Political clarity will end ‘three years of pain’ for retailers

The UK retail sector is predicted to grow by at least 1 per cent next year, following “three and a half years of pain”, according to the latest predictions from an industry think tank.

The think tank expects a 1 per cent sales rise in welcome news for the British high street. Picture: Ian Georgeson
The think tank expects a 1 per cent sales rise in welcome news for the British high street. Picture: Ian Georgeson

The KPMG/Ipsos Retail Think Tank (RTT) is “cautiously optimistic” that this month’s general election result will bring perceived clarity among the public regarding Brexit, and therefore boost consumer confidence and kick start spending.

It said UK retail outlets will feel the benefits from both this rebound in sentiment and the growth stimulated by an estimated recovery in the housing market in 2020.

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RTT expects that the embattled British high street will enjoy a sales increase of 1 per cent or higher in the next year, adding that the idea of “Brexit being done” could ease shoppers’ concerns.

James Sawley, head of retail and leisure at HSBC UK, said: “The news of a governing party, with a comfortable majority and clear vision for Brexit, gives me hope that we will see a rebound in consumer confidence in 2020.

“The UK consumer may breathe a sigh of relief, the end of knife-edge votes and uncertainty should translate to a loosening of the purse strings.”

Ethical values

The think tank said that next year’s trading deal negotiations with the EU and elsewhere will “undoubtedly” cause many retailers to review their supply chains to avoid potentially damaging disruption, but that this will create an opportunity to focus on local manufacturing, sourcing and food production.

RTT cited ethical values as an increasingly important factor taken into consideration by shoppers, as consumers become more aware of the impact of supply chains, delivery methods and packaging on the environment.

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However, RTT also anticipates that the retail industry will see an increase in the number of re-structures and administrations in the coming year, with those working in the mid-range clothing and footwear sector expected to be among the most at risk, along with department stores and shopping centres.

Cost savings will continue to be a common theme in 2020, with the think tank suggesting that retailers will need to save a further 3 to 5 per cent over the next 12 months.

RTT also predicted that weak food sales over the Christmas period will set a precedent for a tough year ahead for supermarkets.

It attributed this to changing consumer behaviour, as shoppers move towards purchases from small stores and food delivery specialists rather than large supermarkets.

Mike Watkins, head of retailer and business insight at Nielsen UK, said: “After three years of weak growth there is a need for many supermarkets to reposition in order to be able to achieve a growth in value sales that at least moves in line with CPI [Consumer Price Index], and a recovery from the 1 per cent decline in volumes across the £164 billion food retail industry in 2019.”