While the industry can do much to help itself, a lot rides on easing some of the policy burdens imposed on it by Government.
This time last year we were staring at a Rubik’s Cube general election. There were endless deliberations about hung parliaments, coalitions and the rise of UKIP.
Once that uncertainty was out the way, retailers were cautiously optimistic as people’s disposable incomes were rising and the economy looked to be on the up.
Since then, sales growth has remained hard to come by for most.
The BRC’s figures this week showed that December retail sales grew by 1% – nothing to write home about and bringing to an end the worst-performing quarter of 2015.
During the second half of last year, the Government was also busy laying down its agenda for this Parliament – and some would say pulling a few rabbits out of hats in the process.
We’ve had not one but two Budgets since May, with another this March. The Government wants the UK to be among the best places in the world to do business with smarter, leaner regulation, lower business taxation, increased productivity and increased living standards.
But let’s get this straight: we’ve had nearly three years of falling shop prices, slow sales growth (with more consumer spending going outside retail), intense competition, some overcapacity, increasing investment in digital, falling footfall and the impending implementation of the National Living Wage, and an as yet unreformed business rates system.
“For strong brands with strong, focused leadership teams, the opportunities to make great returns are there”
Helen Dickinson, BRC
So 2016 is going to be momentous for retail. For strong brands with strong, focused leadership teams, the opportunities to make great returns are there.
And clearly the industry will need to work together more often than maybe we have done in the past.
With three million employees in every community in the country, the industry is best placed to deliver on the Government’s shared agenda too. But crucially, it needs the flexibility to do that.
Counting the cost
Our analysis shows that the combined potential cost of policy announcements since the General Election (National Living Wage, apprenticeship levy and estimated growth of rates) add up to over £14 billion to the industry over the next five years.
“UK retail plc has to find nearly 20% of its net profit each year to be able to deal with these impacts”
While it is too early to be definitive about the impact of this on the number or types of roles of people employed in our industry – and therefore the social cost – we know it could be significant, especially in more vulnerable locations.
UK retail has to find nearly 20% of its net profit each year to be able to deal with these impacts.
While everyone I speak to supports the need for the industry to do more on pay, the question is how we can ensure we don’t end up employing fewer people in lower-quality jobs.
Part of the answer takes us back to business rates.
As the Treasury wraps up its rates review in the next few months, now is the time to recognise the disproportionate burden on retail, go beyond devolving the burden to local authorities and lay a path to a truly sustainable system.
In doing so it will give retailers the flexibility needed to implement the living wage in a way that helps retail businesses and their workforces thrive and the Government achieve its wider objectives.
The Europe question
Oh, and if we want to add more uncertainty into the mix, how could we forget the questions around the UK’s membership of the EU?
The focus currently is on what reforms Mr Cameron can achieve, and for that reason the BRC has been making clear why a better-functioning single market, more focus on international trade and better regulation are worthwhile goals in themselves.
This year is a year of big decisions and the pace of structural change will only accelerate.
Fortunately, retail’s deep strength is its ability to make its own weather, but 2016 marks a critical juncture for the industry.
If left untouched, the recent burdens on business will hold our industry back from its ability to help itself and its midwifery role to the Government’s stated agenda. That would serve no one in 2016.
- Helen Dickinson OBE is chief executive of the BRC