What does the election result mean for Retail?

The party manifestoes offered little other than more pain for retailers, but the uncertainty arising from the election result threatens to damage the industry more than any policy could. 

In one sense not much has changed for retail – little in the way of policy will be implemented in the short term while the current mess is somehow cleared up. There was precious little promised from any party for retailers to cheer anyway, just half-hearted promises to review business rates at some unnamed point in the future. The main choice was which party would increase their costs the least with their different levels of minimum wage hikes. Conservatives, Labour and the Lib Dems all signalled that increases in taxes would be on the horizon if they won power, which would have only depressed consumer spending power.

Little wonder then that this time around, retail business leaders were conspicuous by their silence during the election campaign compared to 2015, when many offered more vocal and partisan support, mostly to the Conservative party.

While we are none the wiser as to which policies will be implemented over the next five years, we can see that uncertainty is damaging to the economy and retail in the short term.

All bar seven of the 45 stocks in GlobalData’s portfolio of UK listed retail shares, have lost value this morning. The pound has continued to weaken, and so imports will get even more expensive, continuing to put upward pressure on shop prices.

The uncertainty over how Brexit will be handled and who will be in power may see a drop in consumer confidence, if people perceive that their financial position could be affected. Many may be delaying making big ticket purchases in the coming months.  

In the longer term, the unstable political climate may well delay the Brexit negotiations, which could have implications for the longer term outlook, with projections of a significant recovery in GDP growth moving further away.  Indeed, the notion of what Brexit will actually look like is even more difficult to comprehend now. The Conservative party may hang on with a minority government with the DUP but be forced into a more hardline Brexit stance, or it may be forced into a softer stance if it opts for a more harmonious approach with the other parties.

If, as many political commentators are suggesting, a further election is likely, then perhaps some sort of consensus can emerge eventually. But at the moment, the future for retail looks anything but strong and stable.

By Patrick O'Brien, UK Retail Research Director at GlobalData

Image - courtesy of Shutterstock 625109069

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