LIVE MARKETS-UK retail faces autumn test as tax hikes loom
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UK RETAIL FACES AUTUMN TEST AS TAX HIKES LOOM
Retail sales in Britain are holding up, supported by resilient real wage growth and a benign sourcing environment, especially for retailers importing from Asia in U.S. dollars.
But RBC Capital Markets warns the outlook could be clouded this autumn as the risk of tax hikes looms.
"There is likely to be some consumer caution this autumn about potential tax rises in the budget," RBC analysts say in a Monday note, echoing Frasers' FRAS.L recent warning of a "drumbeat of doom."
The UK government's failure to deliver planned benefit spending cuts, combined with a weaker growth outlook, has left an estimated 20 billion pound ($27 billion) shortfall in the Chancellor's fiscal plans, according to RBC economists.
As a result, it is likely that the government will have to rely on tax rises to fill that gap, with options such as freezing income tax thresholds or reforming pension tax credits.
That could weigh on consumer confidence just as the sector enters the crucial holiday trading period.
(Danilo Masoni)
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