The scale of the problem

This morning we hosted a really interesting breakfast discussing the outcome of the election, with panellists including Ottakars founder turned Tory MP Philip Dunne and Guardian political editor Michael White. Our other panellists were the FT’s excellent retail correspondent Beth Rigby and Hill & Knowlton chief executive Richard Millar, who kindly hosted the event in his very impressive Soho Square offices.

It was a very lively debate with Michael in particular being very outspoken. It was off-the-record but there were some interesting insights into what the coalition Government will mean for retail, and one of the big questions debated was whether stringent cuts by the new coalition government could strangle consumer spending and actually make things worse. The sense was that they could.

With worries about public sector jobs, increasing inflation and the possibility of a rise in interest rates, there wasn’t much to put a smile on the faces of the retailers who were there.

Consumer spending has been remarkably resilient through the recession but there seems to be a widespread view that things will take a turn for the worse and retailers need to brace themselves for tougher times ahead.

From a legislative point of view, the supermarkets will need to brace themselves for the return of the needs test and the introduction of the grocery ombudsman, which seem a given, but one positive chink of light was one voice which cast some doubt on whether VAT would go up, to the amazement of everyone else in the room, on the basis that it would be hard for the Tories to go back on their “We have no plans to rise VAT” line which they used before the election.

We can only hope…