Retail cost inflation, which stands at 4 per cent, could climb as high as 9 per cent over the next 10 years, as oil prices rise, economic fundamentals shift and environmental regulation weighs heavy.
Verdict senior consultant James Flower said: “The likelihood is that the Government will get more coercive over the next few years and will place a greater onus on retailers to protect the environment. Like it or not, this will inevitably make it more expensive to do business.”
Retailers’ concerns will be raised further by consumers, who are constrained by the new economic environment. Discretionary income has fallen by about 20 per cent on last year.
Consumers, faced with a plethora of products, are becoming far more selective about what they buy. Aggregate demand is likely to weaken and rates of growth in retail expenditure will slow.
Retail spending growth is likely to average only 2.6 per cent in the 2010s, compared with 9.9 per cent in the 1980s and 3.4 per cent in the 2000s.
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