Retail Economics/BCSC Outlook for the UK retail industry in 2016

In partnership with

BCSC (British Council of Shopping Centres)

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Retail is an inherently dynamic sector. The last 12 months has seen the UK retail landscape in continuous flux with digital and online technologies forging an inevitable shift in retail business models adapting to today’s consumers. Underlying these sectoral challenges lie a complex macroeconomic environment which underpins consumer sentiment and spending power.

UK households haven’t had it better in over a decade. The perfect storm of record low interest rates, deflation across non-discretionary items, rising real wages, all-time highs in employment and robust consumer confidence saw a sharp recovery in households’ spending power. It resulted in the strongest growth in consumer spending since 2007, during the credit-fuelled boom.

So after a landmark year in the consumer recovery, what does 2016 hold for the UK retail industry?

While we expect strong underlying momentum to continue into 2016, the consumer recovery is likely to lose some steam. As we near the anniversary of sharp falls in the price of oil and other commodities, this “base effect” will mean inflation will begin to creep back up in the first quarter of 2016. In addition, renewed austerity measures, a potential rise in interest rates and a slowdown in the labour market recovery will all dampen spirits.

Nevertheless, we remain optimistic that consumer confidence will remain strong and so spending robust. We forecast consumer spending to rise c.2% in 2016, softer than our expected 3% in 2015.

Retailer backdrop in 2016

Cost pressures
After factory gate deflation in 2015, costs are likely to rise across...
Emerging market recovery
A slowdown in emerging markets, particularly China, could have...
National Living Wage
Implementation of the National Living Wage on 1 April 2016 will add...
Consumer behaviour change
The impact of online, mobile and digital technologies will continue to...
Borrowing costs - Interest rates
Appetite for commercial loans has grown significantly...
Continued structural change
Foreign owned competition, changing consumer habits, mobile...
Business rates
Rates remain a significant cost to the industry, estimated at...
Rents and leases
Retail sector rental price inflation has picked up and looks set...
Sunday trading
The overall impact of changes to Sunday Trading laws is still...
Online - breaking down barriers
eBay, Amazon, Etsy and other online platforms are driving growth of...
Regulation
Other regulation includes pension reforms, apprenticeship levy...


Consumer backdrop in 2016

Inflation
We expect inflation to creep back up in the first quarter of 2016 as sharp...
Wages
Wages are expected to continue to rise as the labour market tightens...
Renewed Austerity
The implementation of further austerity measures will start to bite in 2016. Outlined in the Chancellors Spending Review...
Credit and Household debt
The appetite for credit is growing at a fast rate. As households feel...
Interest rates
After record-low interest rates the MPC will come under more pressure to...
Labour market
After an extraordinary recovery in 2015, the pace of recovery in the...
EU referendum
The vote on the EU referendum is likely to cause some anxiety in the build-up and...
Savings
The proportion that households are saving from their disposable income...
Consumer confidence
Consumers are feeling the most confident in 10 years. We expect...
Housing market
The tail-end of 2015 saw an improvement in underlying strength for...


The Outlook for the UK retail industry 2016 report also contains economic forecasts for:
- GDP
- Inflation
- Average earnings
- House prices
- Household disposable income
- Employment

And sector forecasts for: *
- Food and Grocery
- Clothing and Footwear
- Homewares
- Furniture and Flooring
- DIY and Gardening
- Health and Beauty
- Electricals

To download your copy of Retail Economics/BCSC Outlook for Retail 2016 report, please complete and submit the form on this page.


BCSC (British Council of Shopping Centres)

BCSC (British Council of Shopping Centres) is the professional body for retail property – an authoritative voice for UK retail-led regeneration and for the management of and investment in shopping places.

We represent and support members from all shopping formats and in all locations. Our membership comprises of more than 450 individual businesses, including a large number of the FTSE 250, operating in the retail and retail property industries.

Having a broad membership means that we stay well informed about the large range of issues affecting property owners, developers, investors, asset managers, retailers, consultants, shopping centre managers and public sector employees and can utilise this network to develop solutions to many of our industry’s current challenges.

BCSC, Charter House, 13-15 Carteret Street, Westminster, London, SW1H 9DJ
020 7227 4480
www.bcsc.org.uk
@BCSCretailprop