The end of a retailing era

Old fashioned virtues are making a comeback but only because if it's true good to be true, then it is just that.

Banks are supposed to be steady boring, modestly profitable businesses, built on mountains of cash deposits that banks then re-lend to customers at a profitable margin (after operating costs).

Whilst £1 in every £8 spent in the UK (I think that is right) is at Tesco's, they are just sensibly capitalising on the fact that "cash is king" and the "customer knows best".

Sounds like a recipe for a new bank monolith created whose mantra is "sticking to knitting".

"First, there is the strong probability that taxes will have to rise after the next election, as the new government tries to put some kind of brake on the rise and rise of public-sector debt - which will squeeze households' disposable income.

Second, and to state the obvious, interest rates will rise again, as and when the Bank of England is persuaded that inflation rather than deflation is the threat."

Exactly! The other side of the coin of boosting spending now, is that there will be a corresponding cutback in spending later. Buy now, pay later.

The stimulus now is a con - it must be paid back (plus interest), causing a worse downturn later. The Government should not have intervened with low interest rates, cutting VAT, etc., but did so for purely political reasons.

The sensible can see this, and are saving now in preparation for the tax increases and inflation that are looming.

The main reason retailers have not seen a bigger slump is that so many people are employed by the state, and have not therefore seen a drop in income.

The government is borrowing to pay their wages, while the tax revenue from the private sector is dropping rapidly.

This clearly not a sustainable state of affairs. Eventually the govt credit will run out. At that point there will have to be a drastic reduction in the public sector, and retailers will get hammered.

The effect of lowering interest rates has simply been to take money away from savers to subsidise those in debt, in the hope that they will continue spending at an unsustainable rate.

When you think about it this recession is being paid for by the middle income prudent types. Those on benefits carry on as before; the people at the top have already made their pile. Those employed by the government are fine for now, but will soon find their gold-plated pensions worthless as there will be no money left in the public purse.

The effect of all the government measures has simply been to buy a bit more time at the expense of savers and future generations. Some people are actually stupid enough to believe this is the right course of action.

For retailers, the future is actually worse than this. Not only will the unstustainable public borrowing have to go into reverse soon, draining money from the economy, but interest rates will rise, and then consumers will be using much more income to service that 154% debt.

I'm not so sure. First, people might actually spend more if they did not put everything on credit cards. For example: You buy an iPhone for 100 quid and use a credit card paying off over 1 year at 18% so it actually costs you 118 quid. If you paid cash you would still have 18 quid left to spend on something else. Arguably the problem is that too much of the money we spend is going to banks and taxes like VAT and shop rates and not enough to the people who actually make the products we want. The Japanese dont use credit cards, but anyone who has been to Ginza can testify that they do a lot of shopping - as do the Germans.

Also, I dont think people under 50 with any sense will put more money into their pensions after seeing big losses. I think anyone who can do the math will see that its better to just spend the money now and assume you will work until shortly before you die or go and live in a low cost country when you get old. Pensions in their current form with retirement at 65 cant work with a life expectancy approaching 90 and a population with more old people than young people. If you save for retirement your money will pay for today's pensioners and wages for the financial services industry and you will get nothing like the same deal yourself. So why not spend the money when you are young enough to enjoy it.

I haven't been back to M&S since they refused to allow me to try on something before buying it in the January sales. They shut their changing rooms to improve customer service apparently.

I objected to having to wait 20 minutes to buy something that may or may not have fitted then if it didn't have to queue to return it and then hope that they still had one in the correct size at the same price when I could return.

With customer service like that they can go to the wall with Woolies as far as I care.

At Tescos at least they let you try the clothes on first.

still a healthy profit but were will it go - to the shareholders ie the great black hole which puts very little back in to the system

The economy is getting slower,
But M&S (food) prices are getting lower,
A sign of strength, some might say,
But Peston sees it another way,
They could have been worse, they've got people to thank,
Namely the Treasury and our central bank
because without the help that they provide,
their profits would have continued to subside,
As for the future, you can surely bet,
retail will be based on the internet.

https://creditcrunchrhymes.blogspot.com/

The banks should be scared, but then perhaps they're slightly too busy to notice.

As to the high street, taxes and interest rates will inevitably rise (as they are currently low) and with those increases will come further squeezing of the available pound on the high street. That much isn't rocket science.

If you look closely enough you can see that M&S have also sought to diversify themselves significantly from core retail business-M&S also offer a wide range of financial products and have done so for a while.

As to Tesco-in the current climate of pseudo nationalism/'we won't let the bank fail' economics, why wouldn't you move into the banking industry? I can see almost no disincentive save low rates? (which will surely increase in time) Given the lack of available lending liquidity, you might argue that competition to lend is extremely low- yet is extremely profitable. The banks are focussing on competing for savings business to assist their own financial balance sheets leaving the lending back door wide open.

Tesco's aren't strapped for cash or as poorly leveraged as many Banks. Its more shocking that it's taken them so long to move re banking.

The key for retailers such as M&S will surely be to rationalise their existing 'basic' retail operations so that when the corner is turned they will be in a position to expand. I wouldn't be surprised to hear of expansion/less reductions in emerging economies however as their high streets may not be as effected as ours (increasingly apparent).

Interesting that M&S are closing a high number of simply food outlets here. Food is amongst their most profitable area?

RP - Nothing re the pressure on SR? Perhaps the results secure his position?

Also, nothing on G20 yet...indicative of your low expectations?

It's not just Banks and Retailers that should be afraid of Tesco. Just look objectively at how much market share Tesco has already across all the areas it operates in.

Already Tesco squeezes both ends using its huge purchasing power to drive down rewards for producers and to actually push up prices for consumers - do you really seriously think that Supermarkets lose money on BOGOF offers? No. The products are overpriced so that the retailer can give these offers and can buy market share with "Club" card schemes.

Add the ability to agggressively buy/loss-lead market share in new markets such as banking and Tesco is rapidly becoming a behemoth that will need government intervention.

We haven't yet learned the lessons of unfettered capitalism.

I always thought the advice was to pay off debt before you put money aside for savings as the interest rates for debts will eat away at any amount you get from saving.

Surely this being the case will mean that rather than having savings for consumers to spend at some future date what actually happens is a reduction in debt rather than a surplus of "rainy day" money.

If this were to be the case, not only will we all be spending less now and in the immediate future, it is likely that this is going to be a longer term issue for retailers as we get our debts back to manageable, sensible levels.

And less demand means prices need to be cheaper. Not only will this be a retail industry issue, but I still think we have a long way to go in the housing market.

And then interest rates can only really go one way folks......I don't think the fat lady has even arrived at the venue and it will be a while before we even hear her warming up.

Who would you trust to handle your money - RBS or Tescobank ?? It's a no brainer....

"Isn't it striking, in that context, that the UK's consistently most success retailer, Tesco, is investing heavily in creating a banking and savings business?

Other retailers, and the banks too, should probably be a little bit scared."

A lean, adaptable company with negative working capital. If there is one company that can both weather a storm and conquer the fleet, it is they.

Welcome to the United States of Tesco.

Economics wrapped around retailing?

It doesn't work for me.

I think that you'll find a contraction in the high street, and the first to go are all those that the banks don't want to support. It is always the same in a recession. Empty shops grow at an alarming rate, but this time not even the charity shops can afford the rents...When will the landlords adjust their prices to reflect demand?

There will, however, come a time when there are no institutions too large to fail.

I note that you fail to mention the other retailers that are having major issues, and the ones trying to find a buyer.

I also note that you don't comment on the availability of credit to retailers, but then these people don't make anything, and just take a slice of another countries hard work. Prices in shops do not currently reflect the devalued pound which has to affect import prices.

I also think that to link the BoE bank rate to spending is wrong because you could argue that some parts of the recession have not yet reached all parts of the UK, and thus their lives are progressing as if nothing has happened. I'm guessing that many people are simply taking a deep breath

It is also of note that all this extra money that families have is about to be soaked up by the rises in Council Tax, fuel duties, and the other tax rises...not to mention the failure of Utilities to reduce their prices significantly

In fact I could argue that if the VAT reduction was so good, then when it is reimposed it will cripple households.

Added into all this you have reasonable economists saying that the warnings of hyperinflation are already in the market...the deflation is a myth (because Brown forgot to factor in the currency devaluation)...and any saved money will likely be worthless. Interest rates must go up because the BoE governor has to control CPI inflation.

I'm sure all you're seeing in society is "head down" and looking after No1 to try to survive the doom laden warnings.

Since you are someone qualified to comment on economist theories I would think that you're remit should involve those kinds of ideas.

I do, however, agree with Stuart Rose. We are at a plateau position whilst markets take stock and gather information. There is an opportunity to ensure that these people see value, but with the banking system still Moribund to all intents and purposes and house prices still over valued I wonder if we won't just lurch a little further down.

I don't think, Robert, that you can yet call the floor, we aren't out of the woods yet.

Now, Robert, didn't a few of us, your loyal commentators, come to much the same conclusion a while back - around 12:34pm on 08 Jan 2009 if memory serves? (Article "Does the Bank Rate matter?")

What goes around ....

Oh, and guess who pulled out of their joint ventuere with Tesco Bank at just the wrong moment.

Guess they needed the money for something more urgent.

https://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4417357.ece

"Time to crack open the alcohol-free, champagne-substitute, perhaps."
Perhaps not, all this supposed less than bad news story is based on are figures produced by those we have come to view with the utmost suspicion.
These figures just help to create the sawtooth profile produced by the stock exchange trading numbers, in other words part of the short term trading gains and losses created by such "news".
No news would make for a flat line profile and no stupid bonus led profits.....spurious at best.

"..the ratio of UK households' debt to their disposable income was 100%.

In other words, our borrowings were roughly equivalent to all the money we have available for spending after paying taxes."

Anyone who has a mortgage which is greater than their annual or even monthly earnings, can be said to be permanently in debt regardless of what they have in their pocket/bank. The way the unscrupulous (aka enterprising) minority make money in liberal-democracies is through taking advantage of the innumeracy (lower cognitive ability) of the majority whilst peddling the myth of equality, preaching caveat emptor and charging anyone who questions the myth as sexists, racists etc!

Capice ;-)?

PS. very subtle question:....Why did so many 'hoods' of old in USA Hollywood films appear to be cast as of Italian heritage?

"The sensible can see this, and are saving now in preparation for the tax increases and inflation that are looming."

Surely if inflation is your concern you don't save, you borrow. Saving in the face of inflation is pointless, as the money you save becomes worth less and less. If you borrow, however, your debt shrinks in real terms even before you pay it off.

In fact, my suspicion is that the government will welcome high inflation as it will massively reduce the real value of our public sector debt.

I am not sure I would call an overall increase in group sales a slump.
Profits do not need to be huge to run a business, they need to be adequate for needs. A well run business should not be wholly measured by profit.
Clearly many business have not been well run and this is the real problem.
Greed and more greed.
How on earth can consumers keep increasing spend? It is just spread more thinly around the various options. Like for like is now very poor measure.
Who would have believed even 5 years ago how much trade would be done on ebay etc. Not just nationally but internationally!!

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I agree with the Peston`s sentiment in why the feel good factor over M&S`s - better than expected - 4.8% drop in sales. As he rightly points out the public do have more cash in their pocket at the moment. But for how long???

It`s only a matter of time before we go the other way and taxes goes through the roof, interest rates go back up and the powers that be will have a full fledged inflation battle on their hands.It was only a few weeks ago that Lord Turner published in his report that 9 or 10% mortgages are probably on the horizon.

No even factoring in any increased taxes, if mortgages go to this level a lot of people in the UK will lucky to keep the roof over their head. If we get to that stage a 4.8% drop in sales will be something that M&S can only dream of.

I have been making the argument with friends and collegues that the recovery is going hurt more than the recession for some time and unfortunately I still don't see signs to make me think differently.

https://creditcrunchedoutinuk.blogspot.com/

Tesco has become a much disliked company in many towns because of its dominant position, locally it has appealed repeatedly to overturn planning decisions at a unsustainable charge on the community, we cant afford any more hearings on the Council taxes and Tesco's know this.
They might as well go the whole hog, by becoming banks too we can really get to hate them.

Did anyone else notice a downturn in M&S sales when they took the Made In Uk Union Jack off their Windows and outsourced manufacturing abroad?

I believe the same happened when a German company bought the last major UK car manufacturer.

Thanks Robert - A non banking story. You could perhaps have mentioned the cost push effects on M&S's future profitability of a continuing decline in Sterling. Clothing manufacturing costs (in sterling terms)in the sub-continent are up at least 10% so far this year. China is going the same way. Sri Lanka - a major sourcing area - has the same inflationary problems if sterling remains at these levels. In a tightening market for middle of the road clothing, M&S are certain to lose out to the cheapo retailers, unless their often unrealistically high manufacturing standards are relaxed. I guess we'll see an economy range out for the summer season. Both to reflect the changed market place and to protect the main brand from apparent quality dilution. If we don't it'll mean that M&S have not learn't the lessons we thought they had. It's an obvious reaction to the market and if it doesn't happen it means that M&S remain as logistically incompetent as they were in pre Rose times. Looks like a long term problem (as the article indicates) and puts M&S firmly into the "sell" category. Thanks again for the article and please keep focused on the real economy. How about an article on the likely timing for the re-appearance of (say) 8% inflation? August 2010? Or am I being too optimistic?
TM - StH

Recently M&S have dealt mainly in clothing made overseas. At the risk of being called a 'protectionist' I suggest that their sales and their profits would rise astronomically if they made a point of dealing in British made clothing as they did in the past.
Excellent quality at a comparatively low price used to be the hall-mark of M&S clothing. I believe it would be to the advantage of customers and shareholders alike if M&S were to revert to its former trade practice. It
would also greatly benefit our local economy.

everything seems to be gearing up to a rather traditional (70's)way of extricating the UK from the mire:
1) Inflation, a result of QE and leading to...
2) Higher interest rates (to keep your gran happy) and
3) High wage settlements to erode the level of debt from the housing bubble.

Just make sure you've got enough cash in the bank to see you through 1 & 2 before 3 kicks in!

I'm always fascinated to see M&S held up as the bellweather for the British economy. Yes it sells all the staple good and has stores all over the country, but as to how relevant it is, I'm still not sure.
It still seems to be fairly expensive compared to others, and has the slightly upmarket tag when compared to others such as Tesco et al. Given that £1 in £8/£10/£12 (delete as applicable) is forced into the gaping maw of Tesco, shouldn't this be seen as a more relevant alternative?

Oh, and another thing,
What is the benefit of Very low interest rates?
To encourage investment in Industry...
Since when has anyone investied in industry ?

Rant over, back to bed!

The economy overheated due to borrowing; we need to take that bubble out - which is what we can see. Not sure why you are making such a fuss about stating the obvious. Retail capacity will reduce - and is doing so - as will other non-essential manufacturing parts of the economy.

We have gone through the blood letting phase on the whole; the banks are starting to lend again - in a prudent way we hope. Life will go one; bad news has been written off.

Our businesses are fitter; the dodgy ones have gone; confidence will return over the next 3 to 9 months. At that point growth will start; the stock markets will rise and we can all sigh a breath of relief.

However we have to live a sustainable life style; slower growth; less borrowing; less greed and focus on the important things in life.

Like saving the world from our excesses - a BIG GREEN investment would help.

When quoting sales figures can you please discount them against inflation?

Sainsbury's made a big hurrah recently on the back of 3.1% growth in sales. This sounds rather less impressive when you remember that food inflation is currently 11.5% (ONS).

I think Tesco's move into banking may be more defensive than margin-chasing. They need to find innovative ways of hanging on the their market share under a three-pronged assault:

-Aldi and Lidl are attracting ever more of the purely budget-conscious shoppers
-Asda and Morrison are trying to compete directly by out-Tescoing Tesco.
-The ethical/green shoppers and middle classes go to Waitrose, Sainsbury, M&S, in fact anywhere but Tesco.

Personally, I cant wait for the good ship Tesco to hit an iceberg.

A very good post Mr Peston.

A large part of the economic growth of the past few years has been illusory - nothing more than borrowed money taken from the future and spent today. You are right that it is unsustainable, and we must pay down this debt over time, meaning structurally lower growth.

Let us hope fervently that this will "only" mean a lowered standard of living for a few years. I fear however that the more likely scenario is a very deep and prolonged recession which will take a decade or more to recover from, and even then we will never be able to "boom" as before in a wholly changed world.

"well-placed" - don't make me laugh!

33 posts and counting - and no one has yet blamed Jacqui Smith for this.

Come on guys, you can do better than that, surely?

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Thanks Robert, for a timely article reminding us of our situation's reality.

You state: there is the strong probability that taxes will have to rise after the next election, as the new government tries to put some kind of brake on the rise and rise of public-sector debt - which will squeeze households' disposable income.

Probability ???
Certainty !!!
The only probability is whether taxes are going to be in your own language eye wateringly-high or whether they are going to be mind bogglingly and crucifiably-high.

Hmmm..... My income to debt ratio has always been 100/10 or better. I must have been doing something wrong!

But then I don't own an iPhone or an iPod, I shop for clothes when something wears out because as far as I'm concerned fashion is for the foolish and I absolutely detest shopping anyway.

My children tell me I'm old fashioned and stubborn but reading Bob's blog I've decided I'm well ahead of the game.

But back to the point....... It concerns me greatly that Bob appears to be talking up retailing in the same way as Crash and Ally talk up financial services. What happened to the concept of rebalancing the economy by increasing manufacturing?

Retailing growth is a surefire route to further damaging our balance of payments and increasing credit based debt. We need to do a lot less of it than we do now not more.

Good summary RP, but i suspect your like for like sales decline to a large extent may be influenced by the consumer preference towards internet purchases, this should not be looked upon as a new market as clearly people are not going to buy the sames clothes on-line and then in store.

Stuart Rose may be confident he has maintained market share but i suspect the rest of the world are seeing discounters such as primark tkmaxx and even tesco & asda etc maintaining or increasing their like for likes.

If people are borrowing 154% or even 100% of disposable income then frankly they are mortaging their future. There has to be a period of payback, which in our herd mentality is seemingly all comming at once.

There will be payback but the situation is not "dire", lets not talk the recession to continue longer and deeper than need be, just a return to common sence affordable spending.

We need to get back to long term thinking within business.
Building a strong sustainable company based on profit year on year.
When I say profit, I don't mean £30 million this year and it needs to double the following year, I mean growth from decades ago.

As a consultant, I have gone around various companies over the last 15 years seeing the damage CEO/Chairman have done to good companies with short term profit thinking & bonus mentality.

Shareholders small and large must accept that growth is growth and while people are working they are spending and contributing to the system no matter how big or small.

Current Chairmen who work on the same principles as Fred Godwin should be sent to the British Natural History Museum and placed in a glass case that stands for everything that is bad about the human races greed for more at any cost.

M&S profits figures will be appalling.
You have only to pop into any branch to see how bad they will be.
Check out all the special offers on food.
Yet sales have only managed to creep up by 0.4%.
Imagine the effect on their margins.
M&S would be a definite sell, but for Philip Green, lurking in the background. He would like to be the proud possessor of this company. He views it as a trophy.

Tescos are systematically destroying the free market in this country.
They have desimated the High St as far as food stores (bakers, butchers,etc)with Metro stores, are destroying the home goods market with their Home megastores, will smash the catalogue market and now want to move into financial services, (currently I am noticing more TV ads for their car insurance than food). If they move into the banking market then their brand name and advertising power will ensure in it a success.
We will eventually be in a position where
-the only things you can buy are what Tesco's want to sell,
-everyone will be employed either by Tescos (earning minimum wage) or the Government,
-our wages will be paid into Tescobank,
-and the only place to spend our money is Tescos.
The publishing of figures by companies like M&S will be non-existant as these companies will not exist any more.
Still will make RP's job easier with only 1 company to focus on.
#10 - Don't wait for Government action - the more powerfull Tescos get, the more this Government will cosy up to them.

#3 - wykhamist

Unsustainable public sector staffing isn't the way to build a successful economy, I agree! The huge reduction you talk of will come following the next election, with traditional Tory savagery!

The argument that people need to be employed in the private sector is a strong one, with a minimum of public sector support.

Why do we need to employ £50k "Knowledge Managers" on the NHS? We've created "busy work" to keep the employment figures low, when realistically £5k benefits paid for by the state would be cheaper right now than £50k "Informatics Analysts'" wages...

In some areas of the North and Scotland, the level of state employment is approaching Communist Russia!

I'm not a Conservative (although I sound like one on this post), but I just think we've gone too far! Labour aren't used to being in power this long, and have overcompensated!

#2. nametheguilty wrote:

"The stimulus now is a con - it must be paid back (plus interest), causing a worse downturn later. The Government should not have intervened with low interest rates, cutting VAT, etc., but did so for purely political reasons."


The stimulus is not a con; it is, in general, regrettable but wholly necessary expenditure to prevent the collapse of our entire banking system, economy and society. There are, of course, some aspects of the stimulus that were ill-advised, such as the cut in VAT, which cost the country billions and has gone straight into the pockets of retailers, but the expenditure has, in the main, been unavoidable.

And yes, of course taxes will have to rise in order to pay for it all. But we've been living the high life for far too long and a generation of high taxes is probably exactly what we need to get the country back onto solid economic ground for our grandchildren. Hopefully, a lot of those additional taxes will come from the banks that would be bankrupt if it were not for the support of the government and, ultimately, the taxpayer.

It is possible that many people will transfer their current and savings accounts to Tesco in a protest at the greed and recklessness of our other monster banks.
You could say it serves them right, and well done Tescos.
But this means that the British public will need to be protected from the failure of our main banks. In future if they go bust....they have to go bust, and not depend on the taxpayer as a crutch.
Their structure must be changed to facilitate this.

I'm not concerned about the two "adult movies" bought with public money, but more that they paid for Ocean's Eleven TWICE? That is a complete waste of money!

Sky will let you watch a purchased film for 24 hours... Shocking waste!

It's an alright film, but still...

Robert talks about the future.
We know what it is in it - massive inflation.
The other day the Government managed to float off a large raft off debt to the institutions. It was oversubscribed three times.
What made it so attractive?
It was inflation-proofed.
The only thing the ordinary saver should be buying now is Inflation-Linked National Savings Certificates.
Buy now before the crowd arrives and they are withdrawn.

Hmm. High Street blues.

Some of the big retailers have flawed strategy and have been in trouble for some considerable time even if it does not show through easily. QED failure. These failures to date are hardly surprising and there will be more problems to come and even if the decline is slow rather than fast it still will be there.

There is no question that the High Street is in long term decline. The switch from UK sources to China has eased some of the problems, mainly incoming unit cost, and created others, notably ethics, but that move has been made and it is difficult to see what rabbit can be pulled out of the hat next to give an advantage to offset continuing, and in some opinions, growing disadvantages, not the least of which is the risk of onward product convergence and loss of brand identity.

If all products merge and brand identity is lost then the only measurement is price. This is the long term story of the UK, a failure to develop and maintain distinct identities due to short term profit taking strategy. Once heritage is cashed in rebuilding it is difficult, if not impossible from a low cost baseline. The trojan horse is quality and ethics. Long term quality and ethics win out and generally the attraction of lowest price fails if product disatisfaction developes. There is always a place for low prices but it is not everywhere.

The current floor rents and business rates are also, I would suggest, based on all parameters being positive and are showing up as a problem.

In a market environment business rates now would be coming under pressure. Under the monopoly of the LGs the response appears to be maintain business rate levels and then talk about offering free use to noncommercial arts and community groups to maintain occupation activity. Another apparently flawed strategy to go with the general drift to make accessing town centres and parking more and more difficult.

The final straw is making all towns the look and feel the same through the LGs all using the same street architecture, hardware, and signage, and the same chain outlets being present. Back to a lack of identity and the underlying assumption that people will put up with creeping negative attributes. Some are voting, as it were, with their feet and cars.

So I would suggest therefore that High Street decline is not a sound measurement of the UK economy. It is the last place I would put money.

Robert
If the big retailers are down on their profits what about the small shop owners.My home town is turning into a ghost town.In the High street 17 shops have closed in the past year.This is the true cost of the credit crunch.

Excellent post Robert.

However, the situation is perhaps worse than you indicate. It is now abundantly clear that the significant rise in economic growth we have come to enjoy over the last 20 years was entirely bogus. This was only possible through ever more sophisticated credit mechanisms which facilitated the lifestyles we have all come to expect and masked the gaping schism between actual earnings, which have been falling, and the cost of living. Add to that fact that most of the jobs were created in the public or quasi-public sector and you realise that we have snookered ourselves into a corner, which we cannot get us out of.

Where precisely will these new jobs come from that will facilitate the recovery? How, given that the so-called 'golden age' was based on borrowing and that we have accumulated unsustainable debt, can we both pay off this debt and create new growth through spending?

The answers are we can't.

We have developed an inverse correlation between population growth and the capacity to produce our goods in more efficient and less labour demanding ways. All of which means that full employment is no longer possible and even if all this debt could be paid off, which as I indicated above, it can't, the reality of running a more balanced and responsible economic system would mean living with a normative 25% unemployment rate, which no government in a democratic state could accept, not least because it would lead to social unrest.

Capitalism has sadly been brought down, not because of greed and self-interest, these have sadly lain at the heart of society since time immemorial. It was just that the system, unlike communism or socialism was less corruptable, that is until the modern era, when we finally found the capacity to do so, i.e. via globalisation and rapid technological advancement.

The only possible options now are either a)create a new economic system or regulatory framework that can withstand mankinds capacity to undermine it, b) do away with technology and go back to pen and paper, thus restricting widescale fraud, or c) work on reforming human character towards a society based on better self-awareness, higher human consciousness and sensitivity to other, and contribution rather than production.

#30. Andywr

I would hope that your assessment was correct but I fear it is on the overly optimistic side of the fence.

"We have gone through the blood letting phase on the whole; the banks are starting to lend again"

The majority of small business owners in the country would disagree with this comment as many are struggling to survive. It`s wishful thinking to declare a bottom to the blood letting.

confidence will return over the next 3 to 9 months. At that point growth will start

It`s a brave person to presdict back to growth before the end of this year. A fresh report out from the OECD this morning is forecasting further decline which will place further pressure on an already shaky foundation.

''Isn't it striking, in that context, that the UK's consistently most success retailer ... is investing heavily in creating a banking and savings business?''

It, along with a number of other large opperations is a cleverly run business. I would suggest the strategy, by design or default, is to take very outlet normally in the High St and put one in the supermarket. eg bank, pharmacy, doctor, electrical, hardware etc etc. That is evident from the pattern of activity. It is very logical. This transplants the High Street from the town centre into the supermarket reducing the individuals need to go anywhere else. Floor costs are inevitably lower in this environment. It has implications and the only control is the planning dept at the LG, and quite frankly they are not up to the job. They do not have the wallet, the specialist knowhow or the number of personnel. They are also beseiged by pressure groups. I'm glad I don't have the job.

Its probably hard for him to say too much at present but surely the only sensible thing to do now is consolidate and/or merge since the UK is massively overshopped.
My money is on a tie up between M&S and Next with Simon Wolfson as the next M&S designate CEO-after all they are old buddies through Stuarts retail spell at Argos (acquired by another great retailer Simon's dad Lord Wolfson and then demerged);they are both excellent and complimentary retail brands; serving different demographics through two great fascias, with the addition of great web and catalogue expertise at Next.
They need to act fast before a combination of Primark style discounters, Amazon and value driven consumers eat their lunch (just selling jam sandwiches wont do it guys).

Marks and Sparks already had a foreign exchange system going *before* Tesco did !! And Tesco's move is simply and extension of its overall strategy to expand into financial products like credit cards, insurance and mobile phones !!

Perhaps Tesco is buying into the one-stop-shopping concept, where you can do everything you want in just one place !!

Marks and Sparks have a long way to go to catch up !!

#34 MarkofSOSH:

"33 posts and counting - and no one has yet blamed Jacqui Smith for this."

-----------

Is it 'cos M&S do not sell adult videos?

Thank the lord for the treasury and BOE , eh Robert? HSBC offer a personal loan for 9.9% with Barcalys and RBS not much lower. I am sure the banks and retailers are thanking them but the general public are paying through their noses. Base rate is 0.5% isn't it?
Please investigate how the man in the street is coping instead of following the Governments reasonings. Things are getting worse. The housing market may be stabalising but at fixed rates of around 5% unless you want a 2 year fix which incurs costs now and in 2 years when you change it (at about the time inflation may be rampant).
I hope we get through this soon or the demonstartions at the G20 may be the least of our worries.

#34 "33 posts and counting - and no one has yet blamed Jacqui Smith for this."

We can't because Mr.Timney did not get his porn from M&S !! And there is *NO* M&S own label porn either !!

Seems like a good bit of spin by the M&S PR Department to me. Sainsburys increases sales and profits but somehow these are "good" figures?
The broader picture is that we have invested far too much in retail in the last 10 years. Many of the shopping centres (which were used to fund many developments that didn't add up otherwise) will turn into white elephants. We are already seeing this with retail parks and town centres. How many of the Woolies shops are still empty?
This will have major consequences for employment and tax revenues but is probably a good thing if it reduces are appetite for imports and gets wealth creating parts of the economy on the front page of even business sections more often (even if you can't put a model in a sexy dress).

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We should all be scared of Tesco's whether we shop there or not. I for one do not shop there but there will come a time when we have no choice and they will then charge what ever they like and we will all be at their mercy. They are fighting a very public war and very determined to win, unless we the public use people power to stop them but they know how to manipulate the public. The Lemming factor works for them everytime!! People power can work if we choose to use it but will we?

Back in the 1960's when the very first selfservice stores arived on the High Street, my Dad said it was a bad move and we would all rue the day. He predicted then, that one day there would be only one retailer and that they would fix the prices, as there would be no competition. He died in 2007 at the age of 90 and could still see where we were heading!!

On the other side of the argument the World couldn't actually sustain the growth we were experiencing and the obscene over production of cheap and mostly tatty goods on our High Street and shopping malls, carted half way across the World at great environmental expense, merely to feed an addiction, not a need and were made by others for a pittance in often appalling work conditions. How can anyone be proud of market forces?
Did we care, did we heck!!!!

I really hope that we have seen 'The End of a retailing Era' and that we get back to commonsense ( a word sadly removed from the dictionary.) If people really do begin to save and buy things when they actually need them and not just want them it can only be a good thing.
You can only sell the family silver once and this is what the World has been doing with its precious resources and the sooner Governments, big buisness and ordinary men & women accept this the better it will be for all of us and more especially for future generations, who will have to inherit the excesses of the past few years and the terrible damage we have inflicted on the World simly to feed that greed.

There are retailers on the High Street who boast an ethical policy and yet in reality its all spin. My daughter recently worked for a fashion chain who insists that the staff buy the clothes they wear for work from the shop ( at discount) but they had to buy new every season including jewellery. My daughter only had an eight hour contract but was still expected to buy new clothes. Each Summer & Christmas Sale they supply their staff with three brand new tee shirts for the sale period. After that short sale period they had to dispose of the tee shirts. They were not allowed to keep them or put them in to Charity bags nor into the dustbin but had to cut up perfectly good tee shirts and use them as rags. I just cannot believe that a retailer who boasts such an ethical policy both in store and on its website is behaving so hypocritically and yet gets away with it!! The web has been a wonderful invention but the amount of abuse by big business is a disgrace they say one thing and do something completely differently and there is no comeback. Why does the trades description Act not apply to websites?

We don't want or need the World to try and get back to what we had pre 2007, we need radical, revolutionary policies, ideas which give all of us a sustainable lifestyle, free from excess, free from manipulation/corruption. Money should be there for the good of all not for the greedy few who have no morals, no conscience, whose simple goal in life is to accumulate vast wealth for themselves.
We were told in the Thatcher era we need to support the wealth generators/creators. what rubbish, what nonesense, what a con. there was never ever any intention by the 'chosen few' to spread the wealth round to create a fairer World.
Everyone needs to feel worthwhile and that they can contribute and be recompensed properly for their efforts. Everyone also needs to be mindful of his or her social responsibilities and how their actions impact on the rest of humanity. People need to take responsibility for themselves and their families but need the 'tools' with which to do that. Seeing others attain such wealth for doing so little, doing it so badly,so incompetently and still reaping such huge rewards gives no-one any incentive to work hard. Things do have to change and change quickly, no going back, we can only go forwards.

How can we talk about a global economy when there is so much inequality, and so much greed by so few.

#26 And where, pray tell, are comparatively low priced, excellent quality clothing to be had in Britain ??

#34 markofsosh regarding Jacqui I don't think M and S would sell naughty DVDs so they are just not the right kind of consuming-facing business to interest the Smith household

Peston's figures of 100% up to 154% debt to income (presumably meaning annual net income?) masks the fact that most people will be far below 100% and are effectively savers by nature, whilst a few are feckless or, as young people having to get onto the overpriced housing ladder end up with probably 500% ratios!

anyway the obvious point, which I admit Peston does partly allude to in a way, is that we are likely witnessing a series of PERMANENT CHANGES

these include:

a long term switch to less credit
the ongoing rise of internet shopping instead of face-to-face shopping
a move away from a fossil-fuel dependant economy
the rise of prudence and caution
higher taxes
THE NEW AUSTERITY

frankly I'm fairly sanguine about it; tough on people who lose jobs and tough on LDCs but we need to try to work towards a sustainable global economy that does not depend on our buying loads of crap we don't need

Interest rates are low but the money is not available so that is a waste of time except for those on a variable rate mortgage. Whilst creating havoc for those who have saved and who supply the money from which mortgages are funded. Those with savings are also not spending as they need to hang on to their money. Is this a good strategy then?

Vat reduction has not been a real help as peoples everyday spending and budget does not include items that attract vat. Is this a good strategy?

Creating new money, as this is not really creating new money just more borrowing this will simply be added to our already overblown borrowing so....Is this a good strategy?

In the past 2 weeks the shops have been very empty, so the full March figures will be interesting. Inflation is on the up and the whole picture is very unsable, so heads down and keep knitting.

interesting that m&s figures are so far down yet SAINSBURYS , WAITROSE, TESCO all are up , Perhaps Mr,ROSE should have worked with JUSTIN KING and not pushed him OUT, would appear to get a merchandising knighthood in UK your first job is to send 40000 jobs in NOTTINGHAM abroad,No wonder there is such disenchantment.

A number of comments here reflect my concern of a W-shaped slump with the real sting in the second part of the letter.

There are still people out there spending mainly because they have the habit and no better ways of using their time. This will change but how will that change take place and when are the big questions. I see a migration to quality as fashion becomes irrelevant and innovation an unnecesary expense.

The issue of government debt is going to hit us hard over the next year. That there will be higher taxes is not in doubt but the real hit will be the reduction in consumer spending subsequent and consequent to the massive cuts in government spending which will be needed just to stabilise public finances. This is the second part of the W-shape slump. This is the bit I really fear although I have been expecting it for nearly thirty years.

Our culture has placed government in a central role in society. It is a massive employer and it has been dependent upon what has been a slowly shrinking value creating private sector to sustain it. Not only has this government overdone the growth in the state it has punished the private sector with reduced wages, high taxes, crippling and often irrelevant regulation. Now government spending has been allowed to explode. There may be good reasons for this but this debt has to be repaid and we have little with which to repay it.

The future does not just look bad it is going to be bad. We have been living in faerie-land for too long and now the Grim Reaper is calling.

As for M&S it looks to me even more like a jumble sale each time I walk through it. On the other hand Tesco looks more and more like a slum each time I visit a store. Just how do they get their stores looking so equally shabby? One can see where the profit goes.

Can RP complete the important second half to his statistical argument re ratio of houshold debt to available spend? What is it now that the 40% + of mortgage holders have seen the tracker effect from interest rate cuts .

Ilesy77

Robert,

I see the OECD has a report out about the UK's recession being shallower than Germany, Japan, and the US

What I can't understand is why this is the headline being spun when most of the caveats to the report are already being broken by this government with its policies.

To add the further fiscal stimulus seems to suggest that even this will blow the report out of the water. Has it in fact been published to put another shot across Brown's bows?

Credit Crunch. Tax Crunch. Pensions Crunch. Entirely predictable outcomes until 'leaders' change how they 'lead'.

A lean philosophy offers a proven and completely different approach to 'leadership' and 'management' (as well as 'economics'). It focuses on continuously innovating/problem solving and providing customers' precisely what they value.

Early adopters (such as Tesco) are benefiting from applying such approaches and progressively offering new value propositions as a result. Those who are slow to adapt will find it difficult to catch up (or stay alive).

David Clift

A rise in income tax will just result in more problems, because this means workers earn less money. This means more defaults on payments, less money saved in banks and building societies and less money spent in stores.

It is not a income tax rise we need, it is a restructure of the tax system which is required. In fact, I feel that the 20% tax bracket should be reduced to 15%. That alone may make things better anyway.

#5 - Interesting, should we all live for the moment and kill ourselves once we reach the age of 65?

#56 - M&S has its own range of "Food Porn" adverts...

The comments on this, and other posts on this blog lately make me think there is a worrying oversight in how people are thinking about the British economy. All too often, it seems people think it is divided into 2 sections - manufacturing, and financial services. (Well, those and the public sector, which is a different kettle of fish.)

It's all very well saying that we should bring back manufacturing industries to this country, and it's true that we are probably slightly too dependent on physical imports. However, simply bringing these industries back will have little or no effect. We have, at present, a fairly significant competitive advantage in many service industries, and not just the financial ones - think consultancy, market intelligence, and so on; compared to a serious disadvantage in manufacturing, brought about by a couple of decades of movement away from this area, resulting in far fewer suitably trained members of the workforce.

So yes, by all means bring back the manufacturing industries, but it would only work if trade protections became endemic, and not until we actually have the trained personnel to fulfil these roles. Given the current circumstances, it would be better to approach this with great moderation, and use our advantages to best effect.

This comment was removed because the moderators found it broke the house rules. Explain.

Retail: time to review the dominance of vertical oligopolies in our retail sector and get the competition commission out of its box. Being a small provincial food retailer I am concerned when I see a Tesco or Asda home delivery van passing by. The nearest branch is circa 20 miles away and this competition tool delivers shopping for £5.00 a go in a £50,000 van driven by a £20,000 man. Span of influence 20 mile radius circle. Check out the Scottish Borders and similar rural retail deserts in England and Wales.

Banking and Finance: an empirical subject I believe. "Some of these financial instruments are very complicated.." Give us a break. Unravel the Mille Feuille and weed out the true defaults and allow the value of the book to be ascertained properly.... It's what you do.

House Prices: there is still a lack of affordable housing, it's a supply and demand thing chaps not helped by a lack of affordable finance for buyers and builders. The heat is still in there.

Manufacturing: can't see our over-regulated, expensive, admin. intensive, National Insurance disincentive workforce ever competing effectively in a world economy with accesss the emerging nations' labour force in the primary industries and consumables manufacture.

Regulation: audit commission, FSA, independent financial auditors, true and fair view. Shame on you.

Permanent Civil Servants.......... Stop having a laugh. Do your job.

Frustrated.

Time to break out the boring people, pay attention to detail and send out the clowns!

At last - the first sign of sense since the Credit Crunch began!
It seems the French will pull out of G20 (is that the sum total of their IQ's?) if stricter financial controls arent introduced.
I just hope their listened to!

Its interesting that no-one mentions product.

I am the sort of customer M&S ought to attract.

I have not seen anything I want to buy in M&S for about six months. I have seen little for the last year. I do not want embroidered or frilly things. I do not want bizarrely shaped sweaters. I want to buy warm clothes when it is cold and summer clothes when it is warm, not the other way around. I want t-shirts and underwear that doesn't shrink when washed or fall to pieces in months. I don't want to show my midriff or have smock-like clothes that look like I'm expecting

My husband wants socks that don't develop holes within weeks (no, not at the toes).

We have found better product elsewhere though on balance, menswear has improved over the last year.

Well, there is some comfort in the M & S like-for-like figures. The consumer is not quite dead & buried?

But I absolutely think we must take a very hard look at how on earth we ended up with a ratio of consumer debt to household income of 100%, never mind the 154% that we ended up with in 2007. As individuals we probably suspected we were not being very responsible with our personal finances. But neither did we appreciate that NO ONE be it, government, top bankers, individual politicians (national and local,) insurance companies, accounting bodies (weak standards,)the FSA (what a joke) were being responsible either and correct me if I'm wrong, but they were paid to be?

One area of banking that fuelled this massive problem was undoubtedly the SALES CULTURE within banks. With Sir James Crosby, an arch-supporter of bank sales, being the former number 2, at the FSA, it could be argued that the FSA had been captured by this mentality. An organisation supposedly there to protect consumers from the worst excesses of bank sales culture? Consumers don't get credit unless someone is willing to provide it! If consumers should not have taken it, then why have all these regulatory organisations, and none of them enforcing anything?

So now we have Tesco trying to get into consumer lending. Sainsbury's has been trying, I don't know with what success, if any? But Tesco's must be worried about future retailing growth. Meaning it's not worried about the financial health of the nation, just about the financial health of....itself. This is not a particularly good development. Then again, you look around at the existing financial landscape and perhaps can't help thinking what a joke!

However, is the consumer so complacent that he/she will not be WORRIED about tax rises, interest rate rises, job losses in the coming months? I don't think so.

Why does no-one mention competition

In our local shopping centre you see hoards of shopper carrying Primark bags and far fewer carrying M&S

Younger women go to Oasis and Warehouse and Karen Millen and French Connection.

And what about internet shopping. ASOS for example is doing just fine.

And what about pricing

Just how many t-shirts at five pounds do you have to sell to cover wages alone, every day, every week, every year. How long before shoppers are t-shirted out

If you want to do low cost, you have to have a low cost base.

Good blog. Nice to see some real business insight again rather than some unthought through banking half scoop news.

What we're all keen to know Robert is what's your April Fool post going to be?? Make it good - don't let us down, maybe something about Gordon Brown??

And what about customer service

Not only could you not try things on during the sales, my experience has been that it is almost impossible to pay.

I bought a swimming costume last week (yes swim wear seems to be OK but I doubt I could buy a cozzie in July) but I had to trawl the entire floor to find an open till.

Hi Stanilic # 64

You mention a W-shaped economic cycle.
I am more fearful of a cycle that resembles a cartoon lightning bolt.
The government is frantically pumping money into the system right now to engineer an upswing.
An upswing might appear, but it will be accompanied by massive inflation, at which point the Bank of England will frantically slap the anchors on with a huge rise in interest rates.
It's this that will cause horrific economic pain, producing factory closures, massive job losses and house repossessions on an unprecedented scale.

And then there are the zero percent M&S credit card deals

Yes I was offered one recently, again.

Zero percent on balance transfers 2% fee. Zero percent on purchases for 10 months.

Its advertised on the web-site, if you are interested.

But pray, what is the cost of this largesse?

What is the impact on profits?

"If a sustainable ratio of household debt to disposable income is closer to 100% than to 154%, then consumers will for an extended period save more and spend less."

That's a very very big and important "if"! What's your evidence that 100% is the sustainable level rather than 154% or, for that matter, 50%?

Moderators: Is it offensive to ask questions about proportionailty in the population along with representation in the control of the economy. Thisis allegedly a democracy. It is legal and legitimate to ask such questions. These should 'offend' some. That is precisely the purpose of a free-press i.e to highlight issues which are cause for legitimate concern.

I remind you that we should look at observed frequencies and we should lokk at mathematically expected frequencies. If anyone sees a discrepancy, an explanation is called for. That is how rationality operates.

To censor that in any form is pernicious.

#69

The only disadvantage we have in manufacturing is that UK fund managers are greedier than others and bully UK companies into moving production overseas in order to squeeze another few percent out of them.

Strategically it's stark raving bonkers.

I think that sums it up nicely. Well done! Don't forget Richard Branson has applied for a banking license too. I would like to see you bat down anybody who says the banks were too greedy. They were not, they simply took advantage of a mechanism that allowed them to turn lead into gold to refinance their lending. It was good business and the government should have constrained it.

Bank alchemy is no longer in use so their profits must come from doing things properly. They take account of the risk associated with lending and price it accordingly. What the government and the BoE will not discuss is that all their efforts are just a stopgap to provide a soft landing to harder times.

The BoE was nationalised in 1947 because the socialists argued it was doing things just too properly. What we have now is the end game on this ideology. People have maxed out on their credit; they are going to be taxed until the pips squeak and lifestyle economics is just going to be a wet dream that society once had.

And having recently been to an ENORMOUS high quality US cash and carry, it seems to me that the face of retailing is bound to change.

Large cheap warehouses for every day needs.

Internet shopping

High end city centre retailers for those special items

Smaller outlets for browsing books, music and purchasing cards and stationary

I have some hopes that the small specialist retailer will return. On balance we don't want to be clones, we want something different.

Neither UK households' debts nor National debts are any sort of a problem. Nor are they likely to be.
Most companies have debt to income ratios well over several hundred percent and they still prosper. Take M&S as a classic example. 2008 accounts show a recognised income of £1.23 billions and debts of £5.2 billions. That is a debt ratio of 420% of its income, and well over the indebtedness of British households that you're so alarmed about. M&S can well afford that because it's finance costs were only £146 million.
British households can well afford their much lower debts because interest rates have been low for more than a decade.
Moreover, as Glen Moreno the Chair of UK Financial Investments says today(FT 31st March), the Banks we have insured and own shares in are probably worth much more than we paid out for. If Governments had Balance sheeets like companies have, we'd be looking at a vast increase in shareholders' assets - not a growing debt.
The problem our world faces - including M&S - is individuals' caution that has cut high street spending to the detriment of everyone. Nothing to do with debt, just "nothing to fear, but fear itself" - to quote FDR.
It's a lot easier to talk about debt rather than investments we've all made. But during the next Parliament those Bank investments will be turned into a massive cash bonus. How shall we spend it?

As Sir Tom McKillop has now rubbished Lord Myners version of events will Mr Peston run the story??? or will he still be a lapdog for ZanuLabour - which do u think he will do.

As for Myners - just another uselss ZanuLabour liar.

#82 - Mostly I agree with you, but...

A huge measure of caution is needed when talking about "mathematical expectations," for two reasons.

Firstly, the answer that comes out of any mathematical analysis is dependent as much on the process being used, as the data being considered. For instance; if I were a supporter of Keynesian economic theory, I could create a model that indicated that the stimulus would be hugely successful. Equally, I could create a monetarist model that results in a negative outcome for this package.

Secondly, I would be hesitant (no offense intended) to suggest that everyone should look at it in this way. I find it hard to comprehend the economic figures being spread around at the moment (what exactly is £20bn, for example - I can't create an idea of that kind of money), and I spent 4 years studying it at university! (Yes, yes, I know that says just as much about me!)

Broadly, I agree with you; but pure empirical analysis must always be tempered by reason.

#82. JadedJean wrote:

"Moderators: Is it offensive to ask questions about proportionailty in the population along with representation in the control of the economy. This is allegedly a democracy. It is legal and legitimate to ask such questions. These should 'offend' some. That is precisely the purpose of a free-press i.e to highlight issues which are cause for legitimate concern."

No, jadedjean, it is not offensive. Neither is it illegal or illegitimate. But it is certainly off topic - and, if I remember correctly, your post was also opaque, vague and almost devoid of any actual meaning.

This is a discussion forum, not a soapbox.

#83

I can understand where you're coming from, but I don't agree. It's less about our advantage relative to say, India, and more about our relative advantage in service industries compared to our skills in manufacturing.

Regardless of the initial root cause (personally, I'm one of the 'blame Thatcher' school of thought on that, though I don't think it's definitely a bad thing anyway), our entire educational system is geared to training services employees - and that's something that can't be changed overnight (nor, perhaps, has it reached its' peak yet!)

What is being overlooked, I think, is that somewhere along the line, there has to be a correction as living standards/expectations and costs rise in the Far East. This, of course, is where a lot of the surplus cash came from that was lent to us to spend on, er, their goods. The sweat shop rates though had to change eventurally, and it appears it is happening now, alongside our recession/depression/whatever. That means the cheap goods will not be found when the economy recovers. Ironically, that may boost our manufacturing competitiveness long term, but by thunder it's going to hurt getting there. We also need some energetic private and industrial investors to rebuild our manufacturing base to replace that which was exported east when it was cheap. Then, there just may be some prospect of real sustainable prosperity some way down the line. And for goodness sakes let's limit what the banks and private equity funds can invest in to actual constructive business, not the insane gambling of recent yore.

In the era of credit crunch, it's clear that large businesses need (and in the future will increasingly need) access to funding. Then, the availability of cheap funding will, potentially, provide a huge competitive advantage.

With banks are now providing overdrafts to highly credit-worthy customers at around 19%, while these same customers receive (if they are lucky) somewhat less than 2% on their savings, what better way could there be for Tesco to tap into the resources of the large number of dissatisfied bank customers ?

What surely must happen come the next Election is that the Elephant on the corner will trumpet loudly.

IE The Huge and unsustainable Public Sector with staff on gold plated index linked and cushioned Pensions. This must change as surely Obama is changing General Motors. It is the culture and mindset of those who are in "safe jobs" and "safe pensions" who need to come out in the open and justify their own existance in a TRANSPARENT manner, to the Public at large. The Private Sector Employees and Pensioners and Savers are taking the full brunt of this severe Recession now, not the Politicians or their Mandarins, or those working in either the Civil Service or BBC, Police, Fire Service, NHS or even the Military, who have good guarrantes of pensions at early ages.

I for one will be trying to save and pay off as much debts as I can muster over this year. I like many others fell into the trap of taking on more credit than I needed. We are in for a bumpy ride with things set to get worse. The government/BoE clearly cannot sustain the low interest rate for too much longer. I think that you are definitely right about the soaring interest rates after the general elections. It won't matter who is in power it will have to happen! With unemployment at a new high, combined with the amount of debt that is in the system it is only a matter of time before the tax-payer is squeezed again to cover the benefit & housing costs etc.......

It makes me wonder if this was engineered to form a one world currency. It is much like the American banking crisis in the early 1900's. That was an engineered event, perhaps it is history repeating itself?

https://www.freenation.org.uk

The end of shopping is not the end of the world.
Especially if you already have bought everything
you wanted such as piles of unread books, cd's,
dvd's you haven't used for a while, fancy clothes,
gadgets, everything else from glossy magazines

Ericmiltonjohn (#71) "Permanent Civil Servants.......... Stop having a laugh. Do your job."

You're right to say this of course, but they have, you would discover if you looked into it very carefully, been selected over the past 30 years or so, so that their jobs were not in fact done as they used to be (Civil Servants were post-holders).

To be clear (paradoxical though it may seem prima facie), in recent times, they have been doing their jobs very well, just as 'government' wanted, but who were Ministers/MPs acting on behalf of, the electorate or those who sought to benefit from the free-market and are those wto clases coterminus - I suggest not.

I'm not being cynical here, just sadly descriptive. This began with a vengeance with Thatcher declaring war on the Civil Service in the 80s. One has to look at recruitment, retention and promotion in the Civil Service and how that has changed over the years. This was all done in the name of the market, and it has been anarchistic given the strength of the Welfare state and nationalised means of production before '79. The alleged inefficiencies were essentially spin/PR to help engineer its erosion. The attack on mining was a significant step, as this was nationalised energy, gas etc followed. It's been Permanent Revolution ever since, and yet it's Politically Incorrect to point fingers at the group of beneficiaries, even though statistics scream out at those who look at these matters objectively....

Robert,

The retail game accounts for 8% of GDP and 11% of the UK workforce.Prices in the shops today are 1.9% highewr than a year ago.The first quarter of the retailers' year is always a bad one. The big retailers are rediscovering the need to keep in touch with their cost-base. The collapse of sterling and rising dollar is bumping up sourcing costs by 25%. Prices are under upward pressure to compensate. On the other hand, rents are under downward pressure and market-leaders will face less competion. I wouldnt worry about declining consumerism as the issue, rather inflation and over dominant retailers.........Tesco being one.

rbs_temp (#89)

"No, jadedjean, it is not offensive. Neither is it illegal or illegitimate. But it is certainly off topic - and, if I remember correctly, your post was also opaque, vague and almost devoid of any actual meaning."

Interesting. Does that make you a moderator? The post was referred, and at time of posting this, still is, so how else would you know what its contents are?

If one sees disproportionate control of the economy by a networked minority group, is that not something to be legitimately concerned about in an alleged democracy, especially in a blog entitled 'the end of a retailing era'?

If not I suggest you read Peston's book and think carefully about Who Runs Britain and funded New Labour and their predecessors.

Tescao and banking, given the absolute mess they recently made of a supposedly immediate access savings account they will need to invest a little more time in their systems and processes until they can be a trusted savings institution. Its 4 months since I opened an account and I still have no means of accessing the funds. Looking at the scathing comments on money supermarket.com, I am not alone

#83 Wee-Scamp

A massive number of service, back office jobs (IT, call center) have also been moved overseas. £billions are lost in income tax revenue and £billions more lost in spending by salary works on locals businesses. Not to mention the eroion of expertise in a clean industry.

We should change our spending habit to give our spendings to companies and businesses which pay a fair rate of UK tax and employ locals. Where possible, these companies should be FTSE listed, so we can benefit from their profits.