Johnson’s government must now ease retailers’ burdens
So it’s all over, bar the shouting. The Conservative party have won what is being described as an ‘historic’ victory. They swept aside Labour in their traditional heartlands leading to their biggest majority in Westminster since Margaret Thatcher’s 1987 election victory. The Labour Party will have performed worse than they did with Michael Foot’s ‘longest suicide note in history’ – their worst result since 1935, in fact. The SNP’s grip on Scotland appears to have tightened and the other parties have once again been, by and large, shut out of national politics.
The Labour party are currently pinning most (if not all) of the blame on Brexit. Their main claim is that, on the other issues, they won the argument. However, given the scale of the defeat, this simply doesn’t stand up. Voters have not only rejected their nuanced Brexit stance but have also rejected their plans for the economy more broadly. Their proposals for swathes of nationalisations and a new deal for workers has not only failed to capture the imagination of the British public but seems to have been roundly rejected. This will not only shape the immediate future of the Labour party but will be the basis on which they forge their policy agenda for the next generation. Whoever is left on the Labour benches will no doubt seek to move Labour’s policy platform back to the centre – how long this takes will largely depend on how deeply Momentum et al have penetrated all levels of the party.
So, what does this mean for the wider economy and the retail industry?
Notably, although the markets had priced-in the prospects of a Tory majority, the scale of the victory was beyond what had been forecast. Sterling climbed 2.7 per cent against the dollar and is on course for the biggest rise in three years. Put simply, traders are pricing in more certainty about the future path of Brexit and UK politics.
What’s more, early signs show the stock market rallying too with the FTSE 100 opening 0.9 per cent higher, while the midcap FTSE 250, more reflective of UK companies, climbed nearly 5 per cent. While the banks and home builders have seen the biggest gains, retailers have benefitted too. The markets like strong majorities and they also tend to favour fiscally conservative governments, too.
On Brexit, the Tories couldn’t have been clearer. We’ll be leaving the EU by the end of January. It won’t have escaped your notice that the Prime Minister has said he has an ‘oven ready’ deal. There’s vanishingly little chance that it won’t sail through both houses of Parliament. That leaves us with the future relationship. Though we’ve little inside track on what that will finally look like, we know the Government want this done sooner rather than later. Expect a redoubling of effort on negotiations and the details of a Canada Plus style free trade deal emerging with the daffodils in early spring. But negotiating a deal in time for the end of next year remains unlikely which leaves the hard-Brexit door open.
It follows too, that if we are to dispose of Brexit in short order, the focus of our national politics might once again focus more diligently on domestic legislation. And that, frankly, is where the retail industry has needed the Government’s focus for far too long. The structural changes underway in our sector have only been gathering pace and have not been matched by attention from lawmakers. However, despite the Conservative manifesto recognising the challenge of business rates for the industry, the new Government is only committed to ‘a fundamental review’. We’ve had reviews of one form or another for as long as I can remember so it will be absolutely critical that this one is decisive and fit-for-purpose in our rapidly evolving industry. The burden cannot continue to rise.
There are other issues, too, where the government has made friendly noises in its manifesto – changes to the apprenticeship levy and a gradual increase in the Living Wage for example – but there’s nothing that is going to set a retailer’s world on fire. Margins will remain tight and the Tories won’t be giving much away that will ease that struggle in any significant way.
What’s also worth mentioning is that there are now Conservatives representing areas that have never before had a Tory MP. This is an opportunity retailers must grasp by reaching out to this new breed of Conservative MP and making the industry’s case in full, unified voice. We have a Government with a solid majority. As we start to see more bandwidth emerge, now is the time to work with the new administration to achieve the policy environment the industry needs to thrive.
Why get a FREE TRIAL?
- It's free for 30 days
- Download a great selection of reports
- No obligation
- No credit card details
- Cancel at anytime
- No hassle
- Excel with our RETAIL INSIGHT