THOSE gathered in the Empress Room at Brighton’s Grand Hotel yesterday lunchtime did not look a particularly dangerous bunch. Admittedly, they were vigorous in their attack on the sandwiches and samosas on offer, but they did not appear to pose a threat to a government minister. Yet Gerry Sutcliffe, having bravely ventured on to the platform, confessed: “Officials at the DTI were very concerned about me doing this meeting.”
The meeting, staged by the Association of Convenience Stores, was called “Your Local Shop: its Future?”. Inevitably, much of the focus of the debate was on how the supermarkets generally, and Tesco in particular, were increasing their grip on retail sales and taking over from independent stores and convenience specialists.
The civil servants’ wariness over the attendance of Mr Sutcliffe, whose brief encompasses employment, consumer affairs and competition, was that in discussing this matter of consumer affairs, he might have been drawn into saying something on competition policy. The Enterprise Act of 2002 has been hailed as taking the politics out of competition policy. Even if the Office of Fair Trading had been mistaken in allowing Tesco to take over T&S Stores and make an instant in-road into the convenience business, it would not have been wise for Mr Sutcliffe to have said as much.
The minister said nothing that could have incriminated him with his civil service minders. He did, however, say more than once that “there’s something wrong and we need to do something about it”.
That was the predominant view of his audience, many of whom appeared to be either owners of independent stores or people who resent the rising dominance of a few players. Mr Sutcliffe was careful not to denounce the big retailers, as did the flat-footed former Trade and Industry Secretary, Stephen Byers, who did wonders for encouraging consumer spending and tourism with his references to “rip-off Britain”.
The supermarkets were big employers who had brought to their customers prices that, in real terms, were coming down, he said. It was not the job of government to determine the shape of the retail market, he said. But while distancing the DTI from competition matters, he did say that “social policy is a matter for government”, and indicate that the death of independent stores might come into that category.
The sector should brace itself for some sort of government review before long. Any such review should take note of a survey published this summer called Clone Town Britain.
Dr John Taylor, of the New Economics Foundation, which produced it, was on the platform with Mr Sutcliffe. With no civil servants to urge caution, he declared: “We need to look at breaking up Tesco.” His report calls for the big four supermarkets to be forced to divest their interests above an 8 per cent national market share. Ignore that, as the authorities sensibly will, but the report does have interesting arguments. It is based on surveys of 103 towns and 27 “London villages” and is an attempt to measure the individuality of their high streets. Forty-one per cent were pronounced “clone towns”, colonised by the chains and with little to distinguish one from another.
According to Dr Taylor, specialist and independent shops are closing at the rate of 50 a week. On the day that the CBI’s retail survey reached its lowest level in 22 years of counting, and a succession of retailers revealed depressing figures, it might be worth pondering whether the very homogeneity of the high street is doing its bit to drive consumers to hold on to their cash.
Pensions fund remains unfair
PROTESTERS staged a mock mooning on Brighton beach this week to demonstrate their resentment over the loss of their company pensions because of the collapse of the companies themselves. The protesters are waiting for compensation through the Financial Assistance Scheme, although it is apparent that it is already woefully underfunded.
The Pension Protection Fund (PPF), trumpeted at the Labour conference as the Government’s way of ensuring that corporate collapses will not leave pensioners unprovided for, also looks to be heading for financial meltdown.
It seems Turner & Newall’s scheme is close to being tipped into the PPF, bringing with it costs that could top £125 million. Yet it is only the biggest in a queue of funds lining up to be bailed out by corporate colleagues. The estimated cost to business has already doubled from £300 million to £600 million. But there are some who doubt whether, in its current design, the PPF is workable.
A new paper argues that the levy system, which collects proportionately more from weaker funds and less from stronger ones, is flawed. It claims that, if the weaker funds do pay the levy, it will be at the expense of topping up their ailing pension funds — so it risks quickening their arrival in the PPF.
The paper — by Anthony Neuberger, of the Warwick Business School, and David McCarthy, of the Tanaka Business School at Imperial College — is a response to the Pension Protection Levy consultation. It risks drawing the wrath of those companies that have better-funded schemes and are already angry about being forced to pay a levy towards supporting the funds of companies that have been less prudent. The suggestion that the levy should be tilted so that a higher proportion of the burden falls on them would persuade some companies that they should try to exempt themselves altogether by winding up final salary schemes.
But bailing out pension schemes that may have been underfunded for many years is an expensive business. According to Mr Neuberger, either the taxpayer will have to do it or business will.
It is logical that stronger businesses will be in a better position to do this than businesses that are struggling, and have been given the thumbs down by the ratings agencies that will be pivotal in determining the risk-based element of the levy. It would not, however, be seen as anything like fair.
Compass point
A CLEAN sweep at the top of Compass was inevitable. The caterer has made three cash or profit warnings in a year and fund managers are baying for blood. Sir Francis Mackay, the chairman, booked his exit in May and will soon be replaced by Centrica’s Sir Roy Gardner.
With a dignity that should make him a role model for others, Michael Bailey is not waiting for Sir Roy to axe him as chief executive. At 57, Mr Bailey has announced his retirement next year, giving the new chairman time to choose a successor.
In going voluntarily, Mr Bailey gives up a one-year rolling contract that would entitle him to a £1 million payoff. He sensibly realises that Compass would come under more unwanted City flak if he were “rewarded” for recent failure. This way, too, both he and Sir Francis can better bask in the successes of the previous decade.
Instant dismissal, followed by hurried desk-clearing and a huge cheque, is rarely appropriate. Like Rentokil and Hays, Compass became an unmanageably complex victim of its own success. A new team is needed to simplify and start again. Ritual slaughter is not required.
- INVESTING in early-stage biotechnology companies has to be partly a matter of faith. Trust in those choosing and advising on the investments on behalf of savers is therefore more than usually crucial to the progress of a sector that has potential to provide the UK economy with dynamic growth in future. Sir Christopher Evans has earned fame and fortune as a hard-headed entrepreneur whose dealings are above board. He must not wait for the law to take its final course before clearing the air with investors and dispelling the cloud that now hangs over his Merlin empire.
