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Post-Election Uncertainty Could Impact UK Retail Sector, Experts Warn

Published on Jun 9 2017 12:46 PM in Retail tagged: Featured Post / UK / Government / General Election / Theresa May

Post-Election Uncertainty Could Impact UK Retail Sector, Experts Warn

The announcement of a 'hung parliament' in the UK could have lasting implications for the UK retail sector, with the 'uncertainty arising from the general election result threatening to damage the industry more than any policy could', according to retail analysts GlobalData.

Following the election results, Sterling has already shown signs of weakening, which could in turn have an impact on exports, putting upward pressure on shop prices, GlobalData's UK retail research director Patrick O'Brien explained.

"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," he said.

"All bar seven of the 45 stocks in GlobalData’s portfolio of UK listed retail shares, have lost value this morning."

O'Brien added that the fact that the election result casts doubt over how Brexit will be handled may also lead to "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."

More Defensive

Elsewhere, Bruno Monteyne of Bernstein Research said the uncertainty is likely to lead to food retailers being "more defensive" in what could turn out to be a weaker consumer environment.

"We still need to eat. The first part of wallet to be hit by a squeeze in disposable income will likely be eating out, which may lead to a boost for supermarkets as people need to buy more food to eat in. We may even see some trading up initially as consumers treat themselves in the supermarket instead of eating out.

"Over time we expect consumers will trade down, typically from branded into private label or into cheaper brands. These are well practiced habits for UK consumers. It takes a long recession with a big impact on disposable incomes, and a long period of high inflation, to make people decide to completely change retailer."

Monteyene added that in terms of the election's impact on retail stocks, "Sainsbury's is the most exposed to [a] weaker consumer environment" due to its ownership of Argos.

© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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