“The uncertainty over how Brexit will be handled and who will be in power may see a drop in consumer confidence"

“The uncertainty over how Brexit will be handled and who will be in power may see a drop in consumer confidence"

The uncertainty arising from this morning's (9 June) election result threatens to damage the retail industry more than any policy could, analysts believe, after the failure of any of the UK parties to claim a majority resulted in a hung parliament.

The pound fell more than 2% against other currencies when the markets opened today following the unexpected result of the UK general election. Polls throughout the campaign had generally pointed to a comfortable Conservative majority.

Now, Prime Minister Theresa May has said she will now form an administration backed by the Democratic Unionist Party (DUP) to govern Britain for the next five years.

Daniel Harden, head of desk at foreign exchange specialists Global Reach Partners, says the snap election has not only back-fired politically for May, but has indeed resulted in more turmoil on the currency markets.

"This is hardly the strong and stable outcome Ms May had envisaged and is a huge contrast from seven weeks ago when Sterling surged with the markets anticipating a bigger Conservative majority when the election was initially called. With Brexit talks now set to begin in earnest and Ms May saying she will hang on as Prime Minister, at least for the time being, the pound is set for a rocky ride in the months ahead."

For the retail industry, today's result will mean little change in the way of policy in the short term. Research firm GlobalData says there was precious little promised from any party for retailers to cheer anyway, during the campaign.

"The main choice was which party would increase their costs the least with their different levels of minimum wage hikes. Conservatives, Labour and the Lib Dems all signalled that increases in taxes would be on the horizon if they won power, which would have only depressed consumer spending power," says Patrick O'Brien, UK retail research director at GlobalData.

"Little wonder then that this time around, retail business leaders were conspicuous by their silence during the election campaign compared to 2015, when many offered more vocal and partisan support, mostly to the Conservative party."

While there is little known as to which policies will be implemented over the next five years, O'Brien says the uncertainty is damaging to the economy and retail in the short term.

All bar seven of the 45 stocks in GlobalData's portfolio of UK listed retail shares, lost value this morning. With the pound continuing to weaken, the research firm says imports will get even more expensive, continuing to put upward pressure on shop prices.

"The uncertainty over how Brexit will be handled and who will be in power may see a drop in consumer confidence, if people perceive that their financial position could be affected. Many may be delaying making big ticket purchases in the coming months," O'Brien warns.

"In the longer term, the unstable political climate may well delay the Brexit negotiations, which could have implications for the longer term outlook, with projections of a significant recovery in GDP growth moving further away. If, as many political commentators are suggesting, a further election is likely, then perhaps some sort of consensus can emerge eventually. But at the moment, the future for retail looks anything but strong and stable."

For the economy, consumers and businesses will be concerned by the increased political uncertainty, particularly given the damage the result may have on the UK's ability to negotiate a successful Brexit.

Carolyn Fairbairn, CBI director-general, says that, with a new Government, there has never been a more important time to refocus on the economy and plan with "confidence and ambition".

"The next Government needs to deliver an open, competitive and fair post-Brexit economy that works for everyone across all our nations and regions. This can only be achieved if the next government doesn't put the brakes on business, remains open to the world and sets out a pro-enterprise vision.

"We need to move much faster to fix the foundations of the UK economy and our productivity problem. We need meaningful progress on a modern industrial strategy by the end of the year, with real change on the ground on skills, infrastructure and innovation."

With only ten days before Brexit talks begin, Fairbairn says the UK needs to be fast out of the blocks, with the agreement of transition arrangements and guaranteeing EU citizens' rights as early priorities.

"Firms will support the UK to develop our inclusive, innovative and open economy. More than ever, the new Government must work together with business to make the most of the opportunities ahead. Firms can provide the evidence, ideas and solutions from the shop, office and factory floor to secure our future prosperity." 

Lady Barbara Judge, chairman of the Institute of Directors told The Evening Standard: "Business is getting used to surprises. Brexit, Trump and now this. Most important now is that we get certainty as soon as possible, and we need to go into Brexit with a government that is governing. It's really crucial the voice of business is heard: it wasn't heard enough in this election."

British entrepreneur and chief executive of British online retail OnBuy.com, Cas Paton, says the UK retail industry will remain strong, despite the uncertainty the hung parliament has brought. 

"Just as the economy bounced back from the referendum vote, so will the channel remain strong despite this. In the field of e-commerce in particular we will see businesses continue to focus on the UK to guard against whatever might happen next.

"Change always brings opportunities and with the cost of importing goods potentially rising post-Brexit, we think we will see a renewed focus on trading within the UK.

"Certainly at OnBuy we've seen no signs that political uncertainty ever dents the entrepreneurship and spirit that sums up Britain's approach to business."