Downturn not all bad for retail

Latest White Paper from the KPMG/SPSL Retail Think Tank compares recessions and offers hope for retailers.
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The latest report reveals that policymakers today do not face the constraints of the ERM in the 1990s, yet inflationary pressures are preventing an independent MPC lowering interest rates and easing pressure.

The Retail Think Tank (RTT) considered current economic conditions, reflecting on their effect on consumer spending.

The board found that the household saving rate is lower than in previous economic downturns, thus making it more difficult for consumers to get saving back up to more ‘normal’ levels.

House prices were also found to be higher in relation to earnings than ever before and even during the 'credit crunch', unsecured credit is far more accessible and widely available than in previous recessions.

Taking these factors into account, the RTT agreed that a ‘short sharp shock is preferable to a prolonged, slow decline.’

The paper advises: ‘For a quick recovery, we need to see some or all of; a sharp fall in interest rates; a cut in taxes; a Government solution to the mortgage freeze and a sharp fall in oil/ utilities prices.’

As a result of the period, the RTT believes that the UK will emerge with a reduced number of overstretched consumers, who are less reliant on borrowing, but who are also more discerning in buying and retailers will need to compete for a share of the spending.

As a result of the changes for consumers, the RTT believes retailers will need to be more market driven, creating price wars and improved customer service.

Retailers are also likely to become ‘truly multi channel’ as a recession accelerates trends such as online shopping.

At board level, the RTT believes that retailers looking for investment will become more realistic, helping to create more sustained, stable business development and the changes will create the impetus to expand overseas, offsetting UK pressures.

In conclusion, the paper states that: ‘Good will get better and potentially bigger, whilst the weaker ones [retailers] will not survive.’

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