George Kerevan: Shopping now more than just the high street
EVERYONE seems surprised that UK retail sales jumped 0.9 per cent in January, up 2 per cent year-on-year. Earlier survey work indicated a much gloomier picture while December, in the run-up to Christmas, saw spending increase only 0.6 per cent. Is January a blip or has something changed in consumer sentiment?
My guess is that the British consumer has just got fed up with austerity. A similar thing happened in America in the final quarter of 2011. Suddenly, despite continuing joblessness and a bleak housing market, ordinary Americans started buying again, and running down savings to do so. In particular, they began acquiring household goods to cheer up life. That wee bit extra consumer confidence has helped kick the US economy into higher growth.
In Britain, January retail spending was up in all sectors. Furniture and sports goods (as in “New Year resolutions to get healthy”) did particularly well. Household goods were up nearly 5 per cent.
Some special factors are involved. Retailers have continued to discount heavily, which will have an impact on their profits. But a survey this week from Nationwide showed that consumer confidence rose in January to its highest level since in six months, suggesting the great British public is willing to open its wallet again, if only a crack.
I suspect analysts and the media got it wrong about consumer intentions because they are too focused on the collapse in the past year or so of iconic brand names such as Habitat, La Senza and Oddbins. But the disappearance of these household names has more to do with management decisions and the changing nature of consumer tastes than austerity per se.
Witness the fact that internet purchases now account for some 12 per cent of total UK sales, up from 9 per cent a year ago. That’s a big chunk out of high street spending. The Habitats of this world, with their expensive urban sites, are never going to compete with volume furniture retailers selling online or situated in suburban malls.
Traditional high streets are becoming the province of discount stores, charity shops, coffee houses, pubs, and takeaways. It’s goodbye to off-licences, travel agents and newsagents. Restaurants now make up an amazing 11 per cent of London high street outlets. Economists should beware how they interpret traditional physical footfall counts as an indicator – good or bad – of actual retailing activity.
The retailing picture in Europe is not so positive as in the UK or US. The latest figures cover December and show sales fell 0.4 per cent across the EU, with France, Germany and Spain down significantly.
Cue recession in the eurozone in the first quarter.
Greece saw a spectacular 30 per cent reduction in retail spending compared with December 2010, which is more suggestive of revolution than recession.
It also tells me that more austerity in Greece is not going to happen, whatever Sarkozy and Merkel think.
The Rolls-Royce of nuclear options
IF THERE is one way to sell nuclear power to the British public it is by invoking the name of Rolls-Royce – though the iconic car business was sold off 30 years ago. Engineering outfit Rolls has linked up with Areva, the French nuclear specialist, to provide the UK’s next generation of atomic power plants and is building a factory in Rotherham to meet orders.
The company needs to diversify out of its military aero-engine business because of the contraction in defence spending. In 2011, its defence order book fell by 7 per cent to £6 billion. As well as expanding into energy, Rolls (with Daimler) has just bought Tognum, a big German engine and generator maker, for £3bn.
Rolls seems to be prospering under new chief executive John Rishton, recruited last year from the Dutch retailer Ahold. It has just posted record annual profits of £1.2bn, though mostly on the back of strong civil aviation sales in Asia and its lucrative maintenance business.
The share price is up by some 50 per cent over the past two years, and about 25 per cent in the past 12 months. The question is whether the share price is too high given the modest dividend.
And whether the Westminster government’s grandiose plans for nuclear power ever take off.
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Weather for Edinburgh
Saturday 25 May 2013
Temperature: 5 C to 17 C
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Wind direction: West
Temperature: 8 C to 17 C
Wind Speed: 14 mph
Wind direction: West