Christmas may have been good but this year’s general election will be pivotal in determining the consumer mood

Why should retailers be worried about the forthcoming election?

Many of the big retailers have cited the uncertainty surrounding the country’s leadership as one of the risks they are facing this year.

The country is facing a large deficit and whichever party wins will need to tackle this. To tackle the country’s debt a new government is likely to bring higher taxes and possibly higher VAT.

Next chief executive Simon Wolfson believes taxation will go up by a significant amount, while Marks & Spencer executive chairman Sir Stuart Rose has called for clarity from whoever forms the new government. “It’s important that when the new government comes in they are clear about what the medicine is and how long it has to be taken,” Rose said.

What will be the key issues that could affect retailers after this year’s election?

Whichever party wins the election this year the consensus is that tax will be a major lever. VAT will also be key, which could go up to 20%.

Labour has also said it will raise National Insurance, a big cost for the retail industry, which employs over 3 million people.

The BRC says a new government’s approach to regulation will be a critical issue and said it is important that it allows retailers to invest in their businesses and not in constantly renewing regulations.

Tighter planning constraints, price intervention on alcohol and unhealthy foods are also possible areas for post-election intervention.

The possibility of a supermarket ombudsman is also an area of concern for the grocers. The Conservatives have already come out in favour of an ombudsman, and Labour is said to be delivering a decision imminently.

How quickly could we expect change?

Quite quickly according to James Gurling, a director at public affairs consultancy Hanover. He says: “The pressure on government to provide proof points in the early stages that things are being done could mean things get done very quickly. The danger for retailers is that the Liberal Democrat and Conservative positions are too close and this might force the Conservatives to adopt more radical proposals than it might otherwise do.”

How will the election affect consumer confidence?

Confidence is likely to be low in the run-up to the election as people try to figure out what it means for them.

However, after the election the electorate may be more confident as a new government enjoys a honeymoon period. Tax rises could quickly change this.