As the Chancellor of the Exchequer ponders the year ahead he faces a major problem: Britain’s consumers are spending less money. The real indicator of this conundrum is the performance of the retail sector.
The headlines concerning supermarket chain Morrisons may prove to be the tip of the iceberg. Their results show them falling behind rivals Tesco, Asda and Sainsbury’s. Sales have fallen by nearly 3%. To add to their problems their partnership with US delivery firm Fresh Direct faces problems after the collapse of the on-line website over the Christmas period.
Marks & Spencer report later this week and are expected to admit to sluggish clothing sales despite heavy discounting.
A review of the retail sector in 2012 reveals a much worse position. Nearly twenty firms went into receivership including Blacks/Millets, Focus DIY, Habitat, La Senza, Peacocks, Oddbins, GAME, Clinton Cards and JJB Sports. The total list adds up to 4,262 stores and 61,743 employees. Despite Government and private equity support only 1,877 stores and 28,797 workers were found a future.
In the case of Comet Stores there is now a Government inquiry. Vince Cable, the Business Secretary, has asked the Insolvency Service to “establish if further action is required”. The question being asked is why the UK taxpayer is facing a £50 million bill while OpCapita, Comet’s former owner, will recoup a similar sum.
Consumers face more problems in 2013. The rate of inflation, whichever statistical series is used, will rise to above 3%. Despite the price of Brent crude holding steady at around $109.00 other energy and food price rises will hit family budgets hard. Wage settlements will remain low and in many situations non-existent. Cuts in benefit payments will hit many people. Consumer credit is either restricted or is being left to the extortionate ‘pay day’ loan companies. Property prices (outside the South East of the country) remain low and sales are difficult.
All this means nothing to the London markets which have started the New Year in good form. It is thought that there could be a flight from corporate bonds into equities. The new issues markets remain subdued but by the middle of this year all may have changed for the better.
The next General Election is not until 7 May 2015.
This year the Chancellor will be able to grin and bear it unless, that is, his wife has been shopping.