What a difference a month makes. A month ago the economy was looking a little more settled and perhaps set to turn the corner. Youth unemployment was rising but inflation and interest rates were set to ease and economic growth, while mediocre, was at least expanding.

Fast forward a few weeks and the situation in the Middle East has put that nascent recovery in jeopardy. Indeed, the next few months look somewhat choppy, especially if the conflict becomes protracted.

It’s underlined how retailers are currently dealing with a trifecta of obstacles to growth in the form of geopolitical volatility, cautious consumers, and relentless rises in operating costs.

The Iran conflict has come on top of global trade disputes that have marked the past year. Retailers are closely monitoring the potential impacts on their supply chain, shipping, and energy costs. However, the next few months look like being a very different inflationary landscape.

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 Our latest consumer sentiment monitor shows the conflict and prospect of higher inflation in the months ahead has already had a marked impact on confidence levels. Consumers’ expectations for the economy and their personal finances have plunged to their lowest level for two years, little surprise after the spike in oil commodity prices was quickly felt at the petrol pump.

The financial hit to households, if it persists, will likely mean less disposable income and less money for spending on other things. Indeed groceries are the only retail category where consumers expect to spend more over the next few months. Households tell us they are changing behaviours and trading down to cheaper products and reducing their outgoings on leisure and transport.

The rise in global energy prices and economic uncertainty is unwelcome, too, for retail businesses. Spiking energy costs aren’t happening in a vacuum.

The industry has had to contend with a swathe of new regulatory burdens and taxes over the past year, notably the colossal hike to employers’ national insurance contributions. This has already added to prices charged to shoppers, as the Bank of England has noted.

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The conflict is set to exacerbate this further with the rising cost of energy impacting the cost of production, heating and refrigeration, and distribution including to stores and directly to households. A prolonged conflict will add to the pressures.

Retailers are fiercely competitive and will do what they always do which is strive to keep down prices for customers as best they can. However, there is only so much they can do in the face of global supply chain disruptions and rising commodity prices.

The chances of any financial support for business seem slim, especially as the UK Government hasn’t had a fiscal surplus for over 25 years and with the swollen national debt. It is realistic to ask however that government policy – at every level – does not exacerbate the situation.

What policymakers can do is minimise unnecessary costs to retailers and thereby help protect ordinary households from the rising cost of living. In a nutshell, fixing the cost of living means fixing the cost of doing business.

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UK Ministers could mitigate some of the energy costs that retailers and their suppliers are contending with.

For example, over half of retailers’ electricity bills have nothing to do with the amount of energy consumed but instead are made up of so called non-commodity fees and levies and so could be paused until the energy crisis has abated. Government could look more widely at other regulatory measures yet to be commenced and defer implementation, such as aspects of the new industrial relations laws.

This applies equally to the political parties contesting the Scottish Parliament election and should be the prism though which their manifestos are considered. Sharpening the focus on economic growth and competitiveness and bearing down on costs impacting businesses would help retailers keep down prices for shoppers. It would also support the 200,000 Scots directly employed in the industry and make for more vibrant high streets in every corner of Scotland.

In a month’s time our newly elected MSPs will be sworn in and the administration will take shape; let’s hope they chart a course which bears down on the cost of doing business to aid the cost of living.

David Lonsdale is director of the Scottish Retail Consortium.

© Herald Scotland