Black Friday has been and gone, and reports suggest it was better than last year. But there are reasons to think that this may mark the end of the good times. For UK retail, there may be trouble ahead.

Back in 2015, Black Friday called in the crowds. John Lewis, for example, had its best ever weekend. At the moment, all we have to go on for Black Friday 2016 is anecdotal evidence. John Lewis reported that online sales were up on last year, Barclaycard reported a six per cent increase in credit card transactions on last year. Nationwide reported a 13% jump. But it was online which saw the more spectacular stories. According to IMRG, online sales hit £1.27 billion on Friday, that was a 16% increase on Black Friday 2015.

Then again, it seems November was a good month for retail land. At least the latest CBI Distributive Trades Survey, this time tracking November, rose to 26, the highest reading since September last year.

To put the CBI reading in context, in July the index was at a mere minus 14.

But, as Capital Economics put it "we could caution against getting too carried away with these figures. For a start, the survey only covers 126 firms, 61 of which are retailers, and tends to be very volatile on a month-by-month basis. What’s more, November’s sharp rise merely brought the survey balance towards the official figures. Indeed, despite rising recently, the three-month average of the survey is actually consistent – on the basis of past form – with a much slower pace of official retail sales volumes growth."

So far then, quite good, but what about next year?

And it is in projecting forward to 2017 and further forward that economic forecasters are getting gloomy.

It boils down to wages versus inflation. If real wages aren't growing, then retail sales may be the victim.

As was described here recently, for almost four years from 2010, average wages did not rise as fast as inflation. Alas, the Institute of Fiscal Studies (IFS) reckons we are in for a repeat. It forecasts that by 2021 average wages will be lower than in 2008. Paul Johnson, director at the IFS said last "This has, for sure, been the worst decade for living standards certainly since the last war and probably since the 1920s."

It is just that The Resolution Foundation has gone one step further. It is forecasting a pay squeeze between 2010 and 2020, such that wages after deducting inflation will have seen their worst performance since the 1810s.

It said: "Real average earnings are now forecast to be £830 a year lower than expected in 2020 – thanks to a double whammy of weaker pay rises and higher inflation. Growth of just 1.6% between 2010 and 2020 compares with an increase of 12.7% in the 2000s and over 20 per cent in every other decade since the 1920s."

And while the Office of Budget Responsibility (OBR) has come under flak from the Brexiteers camp for being too cautious, the IFS and Resolution Foundation makes it seem madly optimistic.

But are the three of them, venerable though they are, being swept up in Brexit gloom? When the OBR made its latest forecasts, it made three key assumptions, namely that:

  • The UK leaves the EU in April 2019
  • Trade Negotiations hit UK exports for ten years.
  • Migration policy is tightened.
These assumptions may or may not prove to be right, but what we can say is that the chancellor Philip Hammond based his spending plans on the assumption that the OBR was right.

Well, if the OBR does prove to be too cautious, then at least that will give Mr Hammond more fiscal room to play with in future budgets.

But consider this one thought. Since the revelation that Donald Trump will be the next president of the US, sterling has risen sharply against the euro, making up for around one-third of losses since the Brexit vote. Maybe inflation will not rise quite as high as the likes of the IFS and Resolution Foundation predict.

Just make a note of this debate. In around two years-time we will know who was right, and those who are on the losing side – be they the Brexit mob, or the likes of the IFS, Resolution Foundation and OBR – should tuck into large helpings of humble pie.