With government hands tied, you’ll have to use your ingenuity in 2012

It takes no great insight to observe that the outlook for the grocery trade, as for all retailing in 2012, is the most dismal in living memory.

Irrespective of what happens to the euro, real incomes in the UK will continue to fall and retailers will cut each other’s throats for a share of what’s left. As the grocery market is now mature, supermarket sales growth will depend on inflation, which is predicted to fall. A few years ago I heard a leading non-food retailer speculate if we would ever get back to full margin. Clearly not. Yet the big discounting campaigns seem to be losing their attraction for consumers who now expect to pay less than some notional ‘full price’.

The consequences are equally predictable. Internet shopping, even for groceries, will have a good year. Smaller retailers in town-centre locations will, with few exceptions, have a lousy one. As a result those high streets already on the way down or teetering on the brink will deteriorate further, whatever Mary Portas recommends. Out-of- town centres should hold their own, although the pace of new store construction and associated job creation is already slowing. Business confidence and investment are currently constrained by the climate of uncertainty, which may prevail for quite some time.

What, if anything, can the government do to make life a touch less difficult for retailers? Ideally it would cut taxes, especially for middle and lower income groups, but deficit reduction takes priority.

So why not make deeper cuts in public spending, for example by culling more quangos? Certainly, but bureaucratic resistance seems to be weakening ministerial resolve. Get rid of more regulations, especially those that bear heavily on small businesses? By all means, but while it would certainly facilitate a recovery, deregulation alone cannot ignite one. Lean on the banks to lend more? That won’t happen as long as the uncertainty surrounding the euro continues. Pump more money beyond the £5bn already promised into infrastructure projects? Good idea, but that will take years to materialise and government has a disastrous track record in managing big projects. So not much joy from Whitehall, and even less from Brussels.

It seems, therefore, that retailers and their suppliers must look to their own resources and ingenuity to survive the next few years. Good luck to all.