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Retail predicted to decline, but Brexit isn't to blame

Published: 21 July 2016
The decline of UK retail is predicted to accelerate in the third quarter of 2016, with all three drivers of retail health - demand, margins and cost - expected to turn negative for the first time since 2011, warns the KPMG/Ipsos Retail Think Tank.
Retail predicted to decline, but Brexit isn't to blame
The recent report by the Think Tank revealed that the overall health of the retail market fell in quarter two with weak demand, reduced margins and rising costs following the implementation of the New Living Wage. While the RTT admitted the Brexit vote had delivered an "unexpected blow to retailers," it "isn't the driving force behind the acceleration in the downturn."

Members said that while Brexit had had a negative effect on consumer confidence, it "wasn't all doom and gloom" with several opportunities available to retailers. One of these is the fact that a weaker sterling will make the UK a more attractive proposition for foreign tourists keen to take advantage.

September was outlined as a key month on the horizon, with the 'back to school' mood of customers "hard to predict."

The Retail Health Index dropped one point to 83, the first time it has declined since Q3 2014. Disappointing sales in April and June reflected flat demand and the NLW came into force before productivity strategies had been implemented to lessen the damage to their cost bases.

Ipsos head of retail intelligence Dr Tim Denison said: "Uncertainty is one of the most damaging bête noirs in retailing, and the spread of opinions around the table speculating about the short term impact of the 'out' vote was symptomatic of the degree of uncertainty that exists in the sector. It is possible that if retailers can connect with consumers and portray a message of 'buy now while prices are low', we could see demand maintained throughout Quarter 3. But the reported decline in consumer confidence post 23rd June could threaten the resonance of that message."

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