Tough year ahead for UK retail says think tank

By

Sandra Halliday

Published
Jan 1, 2018

The best the UK retail sector can expect from 2018 is a flat performance as consumer disposable incomes will continue to be squeezed by low wage growth and rising inflation. 

That means shoppers will have to make choices about where to spend their money and it’s likely to see necessities like food and drink taking priority over non-essentials such as fashion.

That’s the conclusion of a new KPMG/Ipsos Retail Think Tank (RTT) report. It said that growth will “flatline” this year and that as well as consumer caution, “continued headwinds in the form of geopolitical and macroeconomic obstacles, an increased number of regulatory compliance issues and ongoing structural change within the industry” will all make an impact.

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But the think tank members think the year could definitely be one of two halves with the weak environment in the first half offset as real incomes improve later in the year.

Yet even if the situation improves, they’re still predicting “increased levels of defensive consolidation and creative collaboration – as well as the inevitable fallout of casualties – the likely outcome in the ongoing fight to survive.” In short, that means more store closures, business failures and mergers/buyouts as brands look for survival options.

The think tank said the Brexit negations, which should advance during the year, will have a major influence on the retail economy with any moves towards a ‘hard’ Brexit likely to cause a market contraction while a softer Brexit would allow the sector to grow slightly.

Tim Denison, the think tank’s co-chairman said 2017 was a tough year and that in 2018 retailers will be working hard to “reinvent the ways in which they deliver that all-important customer experience” in the battle for consumer attention.