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January 11, 2013 6:10 pm
That Britain has too many shops is obvious from a stroll down any suburban high street. That some of the excess might currently be badged Tesco, Sainsbury, Asda or Morrison is less obvious, but looking past this week’s squabbling about who’s the Christmas turkey, it’s clear that Mr Market has longer-term worries about whether the four grocers can ever make a decent return on the edge-of-town real estate where their capital is concentrated.
Shares in the listed trio have been progressively derated. The days when planning permission for a megastore equalled future profits are gone, replaced by the pain of operating and maintaining them. Their decline has been disguised by the supermarkets’ drive into convenience stores, but those food palaces in their car parking deserts are no longer a licence to print money. They may even turn into tomorrow’s white elephants, as shoppers split their spending between convenience and a grand day out at a Westfield-type mega-mall.
The underlying problem is obviously the cash-strapped customer, which means little or no growth for the industry as long as austerity lasts. Then there’s the revival at the Co-op, a business which for many years looked like a carcass for the others to feed off. Worse still is the rise of the hard discounters. Shopping at Aldi has become acceptable for the middle classes. Should it become fashionable, the business models of all four supermarket groups would look horribly overcooked.
Jil spares the RPI
It’s not just the bond market traders who should toast Jil Matheson, Britain’s National Statistician. Statistician she may be, but she is also smart enough to see the unintended consequences of trying to be absolutely right, rather than seeing the (unquantifiable) value in familiarity. Her nerdy colleagues were all in favour of clipping back the Retail Prices Index to improve its statistical purity. Since Capital Economics puts the price of purity at £7bn a year from 2016-17, we can assume the Treasury was also keen.
This is quite a saving, but ignores the costs. Index-linked bonds had priced in what would effectively have been a cut in the coupon. They had still to price in the added risk that, having done it once, some future government would do it again. Given governments’ vast and continuing need to raise money, the cost of fiddling with the index would quickly dwarf the saving.
Measuring inflation is not an exact science, whatever the statisticians maintain. Every family or business has its own, which can be far away from the official rate. The BBC used to claim its inflation was consistently higher, while Saga did the same for the elderly. Oddly enough, nobody claimed that theirs was persistently below the official one. Yet the RPI is generally accepted as a measure of the cost of living, which is where it matters. Statistically stained it may be, but it has credibility. Well done to Ms Matheson for noticing.
On no, not him again
Can it be nearly three years since we last heard a blast from Business for New Europe? Indeed it is, but the song remains the same, and the supporting ensemble under former Financial Times journalist Roland Rudd contains the usual suspects from British big business. This week he corralled them into writing to the FT ahead of David Cameron’s oft-postponed speech on Britain and the European Union. Nobody can accuse Mr Rudd of inconsistency; the 2005 letter urged the government to build on “Britain’s active engagement in Europe”, and the latest calls for a “strong reformed EU with Britain at the heart of it”.
We might all agree with this, but the weasel-word is “reformed”. The EU is a repeat offender at avoiding reform, because doing so would tread on too many national corns. It’s worth remembering, too, that Rudd & Co were cheerleaders for Britain joining the euro, arguing that poor little sterling would be tossed about as a rounding error between mighty currency blocs. Considering the rising tide of support for leaving the EU altogether, his missive is no surprise, even if he sounds like a cross between Canute and a cracked record. You can take the boy out of journalism . . .
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