FEW industries could be more competitive than retailing. The drive to better their rivals is what pushes the major store groups to continuously improve what they offer to customers. So what does a gaggle of Members of Parliament suggest applying to this thriving industry? A regulator, of course.
Imagine how the staff of the Retail Regulator might delight in “protecting” consumers by dictating permissible prices, and suitable sales mixes. The customer would no longer be king, instead it would be the bureaucrats who held sway over what appeared in the stores.
The MPs would have their new creation charged with bringing forward “proposals for the maintenance of a vibrant, diverse and sustainable retail sector”. That is a tall order of a bureaucrat, as likely to result in a dictat that every high street should have the approved quota of coffee shops, chemists and clothes stores and end up looking remarkably similar.
The All-Party Parliamentary Small Shops Group has identified a problem but it is reaching for the wrong weapon to deal with it. In its own evidence it cites the heavy regulation that already governs retailers, with the burden being disproportionately heavy on smaller stores. There is a genuine concern about the speed at which smaller stores are vanishing: in the last decade the UK has lost nearly 30,000 independent food, beverage and tobacco retailers. Yet dubious regulation has hastened this trend.
The insistence of the competition authorities that there were two distinct types of grocery shop, the superstores and the convenience stores, and that the first could be allowed to gobble up the second, has dramatically changed the retail landscape in Britain. There now seems a willingness to rethink that view but it is too late to undo the damage. One lobby group, the new economics foundation, is calling for the major grocers to be forced to divest their stores to limit their market share to a maximum of 8 per cent. Even if that were possible, consumers would be incensed.
Small retailers can still flourish if they provide customers with what they want. The growth in farmers’ markets and specialist stores shows there is a healthy appetite for an alternative to Tesco and the like.
The fact that Waitrose is flourishing is further evidence that the big four supermarkets do not have the market sewn up. So it is surprising to see the John Lewis Partnership company backing the MPs’ call for another full scale review of the over-investigated food market.
The only area where officialdom might have something to contribute is planning. Supermarket deep pockets can provide local authorities with heavy temptations to back their schemes. An obligation to take local competition into account when assessing applications would be sensible.
Path to growth
THIS is supposed to be the year when the main centres of the world economy are all pulling together. The American locomotive is trundling vigorously along, China is rushing up on the rails, Japan has woken from a decade of torpor and the eurozone, led by Germany, is at last reforming its way back to business growth. Rarely has the international economic climate been more benign.
German consumers, though, are not yet convinced. Fearful of high unemployment and their armchair welfare benefits being whittled away, they ignored a general wish that they should whoop it up and splash out over Christmas. So Germany’s 2005 growth, which might have been the best for years, stalled in the final quarter, as yesterday’s figures show.
Strange as it may seem in Britain, however, consumer spending is liable to prove something of a lagging indicator in the new Germany. The reforms begun under Chancellor Gerhard Schröder, and powered by business, are mainly concerned with making things less stiflingly comfortable for the average German worker.
Pay rises can no longer be guaranteed under the deliberately uncompetitive regional pay talks. The working week is moving back up towards 40 hours. Jobs are becoming slightly less secure and the welfare cushion for job losers is being thinned.
Business believes that reform will move ahead under Angela Merkel. As soaring confidence indicators suggest, companies are grasping the chance to make Germany a competitive place to manufacture and to source services. Export prospects remain strong.
So far, this feel-good factor has not filtered down to employees. In Germany, as in Japan, this may cause a hiatus before reform translates into sustained growth. In the new Germany, however, it is a question of when, not whether.
Undervalued
THE description “megalomaniac” is not enhancing on a curriculum vitae. One analyst’s attachment of the word to the name of Sir Fred Goodwin may have been a little unfair but it seems to have resonated in parts of Royal Bank of Scotland, not least the boardroom at the bank’s swish new Edinburgh headquarters. That may not be unconnected with the new appointments announced yesterday.
As he prepares to leave the bank this spring, current chairman Sir George Mathewson appears to have promoted on to the board a strong potential successor to Sir Fred. Coming from the corporate markets side of the business, Johnny Cameron would be an unusual head for a retail bank, but he has grown his division so successfully that it now accounts for about 40 per cent of RBS’s profits.
Mr Cameron’s elevation to the board will go down well with institutional investors, as could his further promotion. Yet Sir Fred’s achievements at the bank have been remarkable. From the transformational battle for NatWest to expansion in the United States, RBS under the guidance of “Fred the Shred” has delivered an excellent performance. That has not been reflected in the share price, and there is a widespread view that a “Goodwin” discount is being applied.
Whether just or unjust, such wariness can be very hard to budge. It may be that under Sir George’s successor, Sir Tom McKillop, and with new executive blood in the boardroom, Sir Fred’s image will be rehabilitated as more of a team player but CVs are hard to rewrite.
SINCE he became a favourite with HM Treasury, Sir Adrian Montague’s career has been hectic. The lawyer who played a pivotal part in establishing the Private Finance Initiative has a string of chairmanships, including Friends Provident. Now it seems that the experience he gained helping the Government by chairing Network Rail and the Crossrail project is about to come in useful. Some may wonder how he and Goldman Sachs could appear so close to buying the Channel Tunnel fast link before they knew it was for sale but they should have been paying attention.
