Retail trade biggest contributor to GDP growth

Figures published this week show that GDP is estimated to have increased by 0.6 per cent during the final quarter of 2016, with the retail trade making the largest contribution to headline GDP growth.

UK GDP was estimated to have increased by 2.0% during 2016, slowing slightly from 2.2% in 2015 and from 3.1% in 2014.

Commenting on the figures, Rupert Eastell, head of retail at RSM said:

‘The latest GDP figures underline the important contribution of the retail sector to the UK economy. However, the picture in the final months of the year was mixed. While many supermarkets recorded some good year-on-year figures, other High Street retailers didn’t fare so well and the ONS data for retail sales in December showed a 1.9% fall compared to a 0.1% fall in November.

Over the next year, retailers will face a number of challenges. Key among these will be having to cope with the lower pound, which is down by around 15 per cent on a trade-weighted basis since January 2016, and is likely to stay at these levels.

‘We could once again see inflation outstripping wage growth which could affect discretionary spending, and the decline in consumer confidence could lead to a reduction in business investment.

‘Retailers therefore need to review their business plans for the next two years and identify any required realignment and risk mitigation activities. They also need to assess the ‘knock-on’ effects for the post-Brexit plan.

‘Businesses must also evaluate the scope for changes in their international activities. With the pound set to remain around current levels for some time, both export and import activities should be re-assessed. The US could become a more attractive market if President Trump delivers the widely-anticipated stimulus, while strengthening commodity and oil prices may boost emerging markets. However, rising import prices may mean sourcing and location strategies need reviewing.’