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M&S: no ordinary downturn

Robert Peston | 07:58 UK time, Wednesday, 7 January 2009

Is Marks & Spencer the true story on the high street or a bit worse?

The story it tells is certainly pretty dire.

The famous like-for-like sales, which show sales per square foot in older stores, are truly horrible - with general merchandise 8.9% lower in the 13 weeks to December 27.

However, it's probably the trend to unadjusted, overall sales that's more disturbing.

For the group as a whole, these were 1.2% lower, thanks to a particularly strong performance outside the UK and on the internet.

But here's the ghastly bit: overall UK sales were down 3.4%, including the benefit of Marks' well-publicised and unprecedented promotional days.

Clothing was the worst performer, with sales 6.5% lower. Food was just 1.1% down - which represents a modest recovery.

Also, the profit margin of Britain's largest clothing retailer was significantly lower, because Marks has been forced to slash prices.

Sir Stuart Rose, Marks's chairman, expects the bad times to last at least a year.

So he's closing 27 less profitable stores, shedding 1,230 jobs and making the pension scheme less generous. He's also taking a knife to investment, with capital spending falling from £700m this year to no more than £400m next year.

This is pretty savage stuff, designed to keep the group profitable during the worst high street downturn for almost 30 years.

Marks' profits this year are expected to slump around 45% to a bit over £600m.

So the days of laurels and awards for Marks' well-known executive chairman probably feel to him like a lovely distant memory.

Update 0839: It's rare that Simon Wolfson, the chief executive of Next, makes public utterances. And perhaps today we know why, because he certainly stirred things up a bit this morning in his Today interview, when he criticised the government's emergency cut in VAT.

This reduction for a year in the VAT rate, from 17.5% to 15%, will cost £12bn. It's supposed to help groups like Next, Britain's second biggest fashion chain, by encouraging all of us to spend a bit more.

But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending.

A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy. He's very worried about the consequential ballooning of public-sector debt - and he believes that, like Next, Gordon Brown could do more to make the public sector more efficient.

Quite rightly, he was at pains to point out that the difficulties on the high street are a recession, but not Armageddon - and that groups like his and like M&S remain solidly profitable.

In which context it's as well to point out that Marks has managed expectations among its investors of what to expect from its results in a characteristically astute way.

Although its trading update was hardly uplifting stuff, its shares have risen a smidgeon this morning.

Comments

Page 1 of 3

  • Comment number 1.

    What's annoying is they didn't learn freom the last time they got into this kind of a hole: they cut quality. Now, why should I buy expensive cords which are supposedly lycra when they tear across the male bits as soon as I squat down, wthin two minutes of putting them on, if I can buy better at Peacocks?
    Rose sorted this out then, pity he's been dragged into the same track now.

  • Comment number 2.


    Again you havent in my opinion really answered the "So What ?" question.

    M&S are selling fewer clothes this year than last year. I suspect most of us probably have enough clothes to keep us warm and presentable, so during a time of financial uncertainity a number of us are cutting back a little on discretionary spends.

    Indeed an economic model which has us all consuming ever greater amounts of goods and services is in a resource limited world clearly not sustainable so one could argue that a rollback is only somewhat sane.

    or am I missing something here ?

  • Comment number 3.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 4.

    thats right none of the companies or corporations ever helped any body except underpay them. we've got real serious problems of our own in our so called real life.

  • Comment number 5.

    I would expect the situation at Marks to be a fair reflection of what's happening on the high street.

    I see Marks as a mature organisation that has recently transformed itself to be competitve again. They have a good line of new quality products (The 2 person Dine For 10 Pounds deal is excellent I think) and are not afraid to take tough business decisions to do what is needed.

    They are no longer the clunking dinosaur they were a few years ago.

    Their actions sound like a sensible post-xmas move and they have now battened down the hatches to make the best of 2009.

    So basically, I think they look as well-positioned as could be expected!

  • Comment number 6.

    The short reporting periods demanded by the stock exchange make it very difficult to build up a big picture.

    If a company makes £10 profit last year, and £3 loss this year, it is still £7 to the good (to put it is super simple terms).

    if they kept this profit, or invested it wisely, would we be talking about recession, or just "a bad couple of years"?

    I was always taught to "save for a rainy day". not to declare myself bankrupt because I spent it all while the sun shone...

  • Comment number 7.

    Robert you told only half the story!

    Number of stock lines? down?

    Company debt? How much?

    Bonus payment to managers?

    How many staff was taken on for xmas?

    Re-source of materials?

    Distribution costa?

    Wage freeze?




  • Comment number 8.

    Good stuff, less landfill then.

  • Comment number 9.

    # 2

    Indeed...economic growth from 2007 levels will never be seen again. Growth of any sort will only show up if we slump and get used to a much lower standard of living (in consumption terms anyway, maybe we'll all be happier).

    Let's hope it gets bad enough for us to question the whole model we live by and come up with something a bit more rewarding than buying more rubbish than we did last year.

  • Comment number 10.

    I sincerely hope that the senior execurtves running our largest, banks, businesses and retail enterprises will now start to inject a new sense of realism into their future business plans on how to survive the next two to three years. When inflation figures and interest rates look like they will be at an all time low then this should be reflected in lower profits and margins expectations.

    When drawing up their bussiness plans senior managers need to adopt a more pragmatic approach on ways to survive the downturn and less on the bussiness school model that shows the easiest way to maximise profits and margins is to maximise selling prices. Maximising selling prices was a simple easy option when times were good and there was plenty of cheap money in circulation but times have changed (possibly forever) and that option is no longer as readily available as it once was.

    In cases where cheif executives see the need to cut back on labour costs, by say 5 or 10 percent, then they should seriously consider taking a similar cut in their saleries and other remunerations to relect the challenging circumstances confronting the business. The days when only the work force are required to make finacial sacrifices are hopefully coming to an end.

  • Comment number 11.

    As per normal from this man, overaction.

    I have been reading about the downfall of M&S for a decade now.

    First from the likes of Gap etc.

    Now Peacock etc.

    Need I say anymore!!

  • Comment number 12.

    I think the Simply Food stores especially on motorways were really good value.I will miss them but as for other M&S merchandise,the food is overpriced without a just reason,their mens clothes range is tat(Asda George range for men is excellent value) the rest you can get at Argos or online much cheaper.As usual the saddest point is those who will become unemployed,that is the tragedy.

  • Comment number 13.

    Phil Green must be kissing all those people who rejected his bid....

  • Comment number 14.

    What a roller coaster you ride Robert

    M and S down 8.9% is "truly horrible".

    Only yesterday, you called Next's 7% slip "not as bad as it could have been".

    Confused, moi?

    What a shoddy business M and S must be, just scraping a £600M+ profit. Oh dear oh dear, how badly run it must be.

  • Comment number 15.

    Sorry for multiple posts, keeps telling me there was an HTML error every time I posted.

  • Comment number 16.

    All of this doom and gloom at M&S, making severe cuts suggests that they are in financial difficulties.

    However their balance sheet shows huge profits for the previous year and I would guess that they are still in profit this year.

    So why is it necessary to be so savage with cuts now? Are they losing money? Or is it simply a way of boosting their profits to shareholders at the expense of the employees?

    Are they going to cut a similar proportion of board members and senior management team too? I think not....................

  • Comment number 17.

    As we all know, this is just the beginning of a very difficult year for the UK and US economies.
    On top of that, the rest of the world doesn't look too great either, as UK and US consumers cut back spending on German and Japanese manufactured goods. The M&S story shows us that consumers are even reducing their expenditure on the cheaper goods imported from China and India.....
    Which means the Chinese and Indians will have to cut back on their spending.
    Then the oil producing nations such as Russia and the Middle East are all suffering due to the low price of crude oil.
    So, it's cut backs all round, and in the UK we have a falling currency, and a government that doesn't have the ready cash to bail-out all the businesses it's promised money to. The UK government thinks it can borrow as much as it likes, but just who is going to lend all this money to our government?
    Never mind, if we ignore it, the problem will go away, won't it?

  • Comment number 18.

    I think Stuart Rose has performed quite admirably here. Although M&S does have good quality food, it's bread and butter is primarily it's Clothing business.

    Closing 25 food stores is surely just good business.

    The main argument may be why did they waste money opening in the first place, but all businesses have to innovate, and occasionally realise they were wrong. Unfortunate for staff etc, but no job is guaranteed, never has been, never will.

  • Comment number 19.

    I think Marks went a long way to securing its future when it started stocking brand names, such as Marmite and Coca Cola - Before this it was a shop where people bought there "upscale" groceries, but still had to do a weekly shop.

    It is now more of a "one stop shop" (although pricing itself out of the market on many goods) which will have helped it retain profits.

    Also, I agree that its Two Dine For 10 pounds deal is excellent, as was its 3 party food and a bottle of cava deal for the New Year!

    It is competitive enough to survive and we shouldnt worry - Its not another Woolworths!

  • Comment number 20.

    There are elements of the service side which are simply not Marks and Spencer ... well, not as we knew it.

    I have a current problem with the quality of milk ... Marks are the only retailer left that sells milk made with 4% fat content. It meets my taste need and I buy other premium foods and wine from the store as a result of buying the milk. But of late I have found the milk is only sold in a 4 pint container and sometimes not available at all.

    I drew this inconsistency to the attention of a floor manager, having been unable to persuade anyone in the department that 4% fat milk 'does exist' and eventually proved my point. The floor manager got in touch with the dairy produce buying team and was told a reply from them would follow.

    That was November 17th and no reply has since come through.

    So now, as I cannot be sure of buying what I want, I use cream instead and buy at Tesco's - which saves me a 5 mile round trip and costs M&S around £40 per week in lost sales.

    Says it all, doesn't it?


  • Comment number 21.

    M&S does not turn me on

  • Comment number 22.

    Can anybody tell me what the 70000 M&S staff actually do?
    Whenever I visit the Chester store there is never anyone to talk to or get advice from and many of the clothes racks are in a mess.
    This has always been the case so it is not surprising that sales are down.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 24.

    We have too many shops in UK, its better to close some and reduce waste. The big cost to retailers are rent and rates, if stores are closed rent could fall due to over supply also government could do some thing to cut rates.

    We cannot continue to sell each other we have to increase our manufacturing base; it would be useful if government cuts tax to manufactures as if manufacturing increases there will be more jobs; these jobs will pay tax and benefits will fall. Over all the country will be better.

  • Comment number 25.

    Closing "less profitable" stores. So they are stores that are NOT making a loss then! People are being made unemployed because they are not making enough fat profits which go to whom I wonder!

    Whatever happened to companies being in the black being a good thing? Nowadays they have to make obscene profits to be seen as being successful. This is the business model these days especially with private equity. Private equity also has that sneaky ability to offload the cost of purchase of companies as a "debt" incurred by the purchased company which has to be repaid within 5 years and can thus be offset against tax........I wish I could do the same with a house and get the people currently occupying it to pay off the mortgage I borrow!! Brilliant!!

    I also note this obsession with measuring performance with 2007 (including house prices). Simply look at charts going back earlier than 2007 and you see that that year can be classified as "mental" peaking in October. So my prediction is that the year-on-year perfromance metrics will start to swing positive as we compare data with a 12 month old post peak curve.

  • Comment number 26.

    I like how all comments are moderated, except Peston's ones. So a 3.4% drop in sales during an economic downturn (fuelled in no small part by the media's scaremongering) is 'ghastly' is it? I'd have called it 'expected' or 'not actually that bad, perhaps things are not as bad as the media is making out'.

    Someone moderate Mr Peston before he does any more damage please.

    And Robert, remember that at some point if you keep fuelling speculation and doom and gloom, the Beeb may start cutting jobs too....

  • Comment number 27.

    In a time of falling wages and squeezed consumers, retail is not the place to be.

    It looks like we will all be shopping in out of town hyper/supermarkets in future.

    They will be the only shops able to cope with long term depression.

    Time to visit the Garden centre to buys seeds !

    Plan that vegetable garden, home grown fresh vegetables later in the year are a good return on a small investment.

    And fruit trees. They are good in the long run.

    How are the Housebuilders doing ?

    I keep asking but nobody bites.

    It is a pity that many new homes are built with small or non existant gardens.

    Never mind, we live in an economy run by Gentlemen or Graduates who do not understand the businesses they run. Too bad.



  • Comment number 28.

    This seems to fall into the "So what?" category. When Chrysler car sales fall 53% that's news, or the Madoff scandal and the regulator that didn't bark in the night --- that's news. Or when tanks are shelling UN schools in the Gaza strip, that's news. But Marks & Spencer only making GBP400m profit instead of GBP600m? Robert, please get some perspective and don't magnify noise into news.

  • Comment number 29.

    The problem with M and S is that they are now neither fish nor fowl. They have never managed to become a desireable 'label' to wear, so don't try to compete on that level - if you have a reputation for producing top quality 'day to day' wear like they used to stick with it; the quality of the goods is no longer as it once was, take 'pants' (well after all, it's what they are best known for!). You buy your new pack of 'pants' only to find they are of a far poorer quality than the last pack you bought 12 months ago - it's hardly going to inspire you to try one of their 'Autograph' shirts or other more expensive items of attire.

    As for everything else they sell - they can't compete with a supermarket as you can't get your entire weekly shop there. The range of stuff they sell for the home is just so 'hit and miss' you will probably go elswhere to be assured of getting what you want.

    They have truly lost their way - again!

  • Comment number 30.

    Oh Dear Mr Peston. Here you go again doing everything you can to spread alarm and despondency.

    It is just another tough trading cycle and everybody in the retail sector is going to suffer but we have seen it before and we will see it again. It is just a matter of degree.

    I am afraid your analysis of observations and prognostications are beginning to become repetitive and foreseeable. It is going to be tough - we all know that but as a former retailer we adapted and retailers will adapt now. Shops will close and others will see an opportunity to open or even expand.

    The FTSE is rising on expectations in general and I notice the US Reserves rose last month. Come on - cheer up and stop being a boring Jonah!

  • Comment number 31.

    Good Morning Robert

    Once again I am interested to read your interpretation of the M&S figures this morning. I think Stuart Rose and his team have done an excellent job in producing very admirable figures in these very difficult times. Furthermore the measures proposed for the future are make basic commercial sense. At least Stuart Rose tells it how it is.

    I would much prefer his approach to that of the CEO of Barclay's Bank whom you managed to extract a grudging, lukewarm apology for the current crisis in your Panorama Programme. Maybe if you focused a bit more on the 'brutal' way High Street Banks are treating SME's at the moment you might find out why people are reluctant to go out and spend in the High St.

    The Times Editorial yesterday stated that the British Public feel this situation is unfair as it is profligate lending by Banks and Public Spending by Governmant that has contributed to this situation. The feeling that we the public are bailing these institutions out is very apparent.

    One last thing I am intrigued by correspondence in the Times from the senior Partner of Price Warterhouse Coopers and an FCA as to the conduct of the Big accountancy firms in this crisis. It is worth futher consideration in my view.

    I praise you for your investigative journalism, but if you could tone down the negative hyperbole in situations which I consider relative successes it would be appreciated by myself and many others. I believe other institutions I have mentioned above deserve far greater scrutiny than they are accorded now by you.

    Regards
    Guy Bewick

  • Comment number 32.

    Perhaps Mondays post was a bit too quick off the mark?

  • Comment number 33.

    It is beyond time that the retail analysts see through this failure of a man, he is just another one of those Burton Buddies that think they are some form of retail guru's.

    Get rid of him now and save us the embarassment of having to listen to his pathetic comments about how he is trying to help the consumer.

  • Comment number 34.

    Here's a link to today's cartoon in the Times especially for all the doom merchants on "Preston's Picks" .

    http://www.timesonline.co.uk/multimedia/archive/00461/cartoon-385_461459a.jpg

  • Comment number 35.

    Dear Preston

    "Always look on the bright side of life!"

    Sales being made through the internet rather than stores is just progress.

    a 1.2% reduction in sales is not ghastly.

    lets have some balance to cheer us up!

  • Comment number 36.

    "But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending."

    The only person who did not realise it was a mistake was Gordon Brown!

    http://news.spotz.com/groups/gordon_brown_must_go/default.aspx

  • Comment number 37.

    Was there any need to drag politics into this?

    Wolfson criticised the Government's ludicrous VAT discount - so you promptly bring in the fact that he is a Conservative supporter.

    Well I expect you now to comment on the political affiliations of every businessman whenever they make a comment - no matter what subject.

    e.g. Lord Sainsbury - A Labour supporter said ....

    If not you are showing the innate BBC ad hominem, anti conservatorem bias.

  • Comment number 38.

    #26

    I quite agree!! Sometimes i think this recession will go on for as long as Mr Peston continues his scaremongering.

    He has suddenly turned into a Z list celeb! Destined for Celeb Big brother next year??

    I dont see anything of importance in M&S results, other than they are still making a lot of money and are going to silm down so they keep making lots of money.

    Wolfson comments are also of no importance. Yes we get it Wolfson your a Tory and your repeating words that we have all heard a million times. The thing is the Goverment needed to to some thing and quick and i didnt see anyone else at the time come up with a brilliant idea.

  • Comment number 39.

    I think greed is the problem here,when the money is coming in they are happy but like most big corporations as soon as the going gets tough they cut staff to the bone,
    Anyone in their right mind knew this was coming, but not even the goverment bothered to prepare for it, i dont even think we are close to the bottom yet and it will get a lot worse before it gets better

  • Comment number 40.

    Can someone lend me a Hobby-Horse?

    There seems to be a glut of them!

  • Comment number 41.

    I agree with Wolfson on the cut in VAT. It will make little impact on the high street. It would have been cheaper and far better for increasing employment to have abolished VAT on 'Building Repairs' for 18 months. That would encourage home owners to do repairs that would need to do sometime anyway. New houses don't attact VAT.

  • Comment number 42.

    Is it not possible to send Mr Peston on a long holiday? We can then get on with our lives without his daily comment on the latest doom prediction waiting to blight our lives!
    Come on BBC you are a public broadcaster try a little balance in you editorial!

  • Comment number 43.


    #38

    I agree with you however the BBC god bless them has a different opinion as outlined in this reponse to a complaint I made about Pestons previous stock market effecting over the top gloom laden melodramas.

    "Robert Peston's tone is always measured and balanced and we've received a
    huge amount of praise for his reporting - a recent survey has shown him as
    the most trusted public face of the global economy above all politicians
    including the Chancellor and the Prime Minister. It is true that we will
    try to use colourful and descriptive language to illustrate the story and
    accurately capture what have been dramatic and fast-moving developments.
    Our audiences are larger and more appreciative of our reporting than at any
    time in recent history.

    We certainly do appreciate the stress caused by the financial situation and
    the real consequences on the lives of individuals, but do not agree that
    our reporting of it adds to that stress or hardship. On the contrary, we
    believe that fair and accurate reporting of the financial crisis helps
    people to understand the origins of the situation and the current
    circumstances and most of our audience is highly appreciative of that."

    I trust this explains the BBC's viewpoint on this topic and thanks once
    again for taking the time to let us know your strong views."

    So perhaps not Celebrity Big Brother but Peston for PM, at least the BBC seem to think so !

  • Comment number 44.

    There is no point in anyone trying to be positive when the media insist on talking things down.

    I've listened to Robert Peston over the last few days acting as Dr Doom.

    On the Today programme this morning Jim Naughtie we tring to put the worst gloss on news.

    Only Simon Wolfson of Next took a positive view.

    So lets be straight forward about the high street.

    Woolworths and MFI have been basket cases for years. Adams expanded too quickly as have some of the other retailers who are in difficulty.

    If Tesco or Marks and Spencer looked like going bust I might be worried, but they are making huge profits.

    As a small business consultant my main gripe with clients is that they have not marketed in good times prefering to let the boom years do their marketing. They are now scrambing around trying to find new customers when the customers have worries of their own. Had they invested in marketing they would now have a larger client base to act as a buffer.

    While the credit crunch is to some extent to blame, it is the weaker "head in the sand" businesses with poor business plans and no contingency plans for a downturn in difficulty.

    So in summary, things are not catastrophic and we will emerge from the downturn. The strong players will be much stronger with a greater share of the pie which will grow in future years.

    At a time where the birth of Darwin is being celebrated I can only think that "survival of the fittest" is very apt.

    So Robert Peston and the rest of the media, don't be so negative, be forward thinking, and look forward to 2010/11 . It will make the situation seem a whole lot better than when you are negative all of the time.

    You are in a privileged position of being on high salaries in safe jobs where you can say what you want with no come-back.

  • Comment number 45.

    sorry, just checking - seem to have some trouble posting on this blog.

  • Comment number 46.

    Its a good thing I didn't read your blog yesterday, else I might have thought that the loss of a thousand jobs "shouldn't be seen as a savage and massive redundancy programme. M and S is the largest fashion retailer in the UK and employs more than 70,000. These job reductions represent less than 2% of the workforce".

    Now, however, I learn that the loss of 1,200 jobs is "pretty savage stuff".

    I must question whether Rose reads your blog/ the general BBC coverage - doesn't he know that the end of the world is actually upon us?

    As an M&S shareholder I am shocked that Rose may oversee a PROFIT REDUCTION TO ONLY £600 MILLION. What business does he have making any profit at all?

    Do please keep using words and phrases like "slumped", "slash prices" and "taking a knife to investment". They certainly add to the perception that M and S management are taking sensible, prudent steps to preserve the business.

    PS love your comment about Wolfson being a conservative supporter. Full marks for balance on that one.

  • Comment number 47.

    "A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy........."

    Mr Peston, what is more important to you? That he is a respected leader of commerce or a well known conservative supporter?

    Are you suggesting he is kicking the Government where it hurts because he is a Tory or he is a leader worried about his business?

    I previuosly ignored blogs about your labour background, but now i am not so sure.

  • Comment number 48.

    Marks & Spencers have yet again fallen foul to the same assumptions that left them in a mess in the 90's.

    I bought a pairs of work shoes last summer that fell to pieces in just 4 months. It is clear that they cut down on quality to boost profits.

    In the new year sales i saw they had suits at 50% off at £80. Normally i would have them made on holiday in Thailand (£60 for a beautiful suit from the best fabric, or at least when Sterling was strong). I did not buy one because the fabric was terribly thin and cheap looking. Hugo boss are selling amazing suits at just over £200 and for £130 you can get a decent respectable suit. Marks and Spencers had better stop taking its customers for fools and attempting to sell tat while claiming to be mid market in quality.

    Shoppers know what value for money is.

  • Comment number 49.

    #27 supercalmdown

    Ah, a swipe at graduates - that's me!

    Of course fresh graduates will initially know less about the "grass roots" of a business than someone who has been slogging it out in a customer-facing role since they were 18.

    The point is that we are supposed to have developed the transferable and technical skills to be able to absorb such information quickly to make up this lost ground.

    In theory at least, a well structured graduate scheme should enable a good graduate to quickly plug the basic gaps in their business experience (e.g. through diverse graduate placements and rotations and the core business areas).

    A BADLY structured graduate scheme is a real lose/lose for all involved.

  • Comment number 50.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 51.

    Over the years M&S have taught their customers not to buy anything before Xmas because like most other high street stores, they will cut the price in January. They and other shops have ripped off the customer for years, now, they will have to pay the price. They and others are still trying to outsmart the customer rather than give the customer a fair, honest service. They deserve all the problems they get.

  • Comment number 52.

    I wish those 'do-wells' who post about 'doom-mongering' would stop and consider more fully what's happening. Some are saying 'shops and businesses will close but others (we) will do OK' etc etc. Kind of like 'there'll be winners and losers'. Well, of COURSE that's aways true! That's evolution. Statistically true and obvious and doesn't need repeating.

    See, the underlying thing this time, as in the 90s is that a huge amount of money/capital/investment, call it what you like - has gone out of the UK so there is a lot less to go around. I don't see it coming back. Add to that the decreased spending power of the pound abroad at the very time exports are so weak - due to its being so high - for so long! You can't turn that around in five minutes. My firm has been heavily export-based for 7 years, I know this.

    So although there will always be canny folk who prosper the long term looks pretty bleak on the whole and the only thing that will turn it around is money coming back into the UK. I expect the Govt to see its fiscal revenues dropping in due course as a consequence in the rise in unemployment and fall in personal and coporate tax revenues. Never mind those who just cannot pay because they're run out of money. This seems inevitable, does it not? The effect of dependence on UK (internal) money just going round and round on this island will be that the pot gets smaller and smaller as Govt spend the tax. There will still be winners and losers but fewer of them. Meanwhile the quality of life (such as it ever was for many) will get worse and more frightening.

    I see no initiatives coming from any party that will encourage regrowth of the economy with 'non-internal' money. The socio-economic consquences of this spiral, well, they're obvious to me at least. All this guff about the UK being able to exist as a service based unit, barmy, completely barmy.

    As for those who cry 'it's caused by greed' - who's job is it to run the country and manage the economics thereof? Yours? Mine? No, it's the Government's job. If the Govt runs an economic 'tight ship' you can be as greedy as you want but it won't get you anywhere! They have the power, they have the means and the authority (should they choose to exercise it, which they rarely do except on meaningless petty legislation that no-one respects, far less wants). Lock, stock and barrel. No use anyone saying otherwise, just plays into the fools' hands..

    I hope these articles by RP and our comments (in general) do make someone take notice, my goodness, I really do.



    GC

  • Comment number 53.

    50

    On my previous point, does anyone think it would be useful/be made compulsory that commentators like Robert Peston, who are by the way opinion formers, should be made to declare their personal political stance before making their comments.

    This would not only lead to more balanced and less biased reporting, but also let us the "donkeys" know where we stand

  • Comment number 54.

    these results are far from ghastly - the problem I feel Bert is you have never ran a business and therefore you are snipping at the edges

    8% drop in turnover would be a result in my book given what has been going on in the recent past

  • Comment number 55.

    Not surprised by these figures. M&S clothes are quite poor now - you can but trousers there for £10 for goodness' sake - and the food is now standard rather than premium - expectations have caught up. Looks a bit like losing clear visoion of their place in the market. SAying that, of course, they are a long way from being a basket case, yet.

  • Comment number 56.

    A fair amount of the time like for like sales in retail will be slightly negative due to canabalisation from new / refurbished competitor stores or the internet in recent years. You have to be a top performing retailer (i.e. Tesco etc) to always have positive like for like after stripping out inflation (i.e in real terms).

    I would say the Marks numbers are good given we are in a recession (anyone care to look at the numbers during the early 1990s one?), marks are more honest about what is included in like for like and things will improve as other retailers disappear or slim down in the coming months.

    The number of items sold went up, they are still profitable just not as profitable as last year, they have less debt than many competitors and no Icelandic links.

  • Comment number 57.

    "A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy."

    Just getting the Brown/Mandy justification for the criticism out early then, Robert?

  • Comment number 58.

    I fail to see relevance or balance in the remark that Simon Wolfson is "a well-known Conservative supporter" - does that make his opinions on the economy less valid?

    The fact is that his remarks on the VAT cut were absolutely right - this is a pointless waste of taxpayers' money at a time when retailers are slashing prices anyway. He was equally right in saying that an income tax cut would have been more effective.

    I would like, just once, to read Robert pointing out the futility and waste of the VAT cut at a time when retail prices are tumbling anyway.

  • Comment number 59.

    More companies with financial problems... Robert will be having a little tug over this one. BBC, when are you going to realise that this type of vulture reporting is not becoming of you. Robert's poor reports contain incorrect and insufficient facts and seemingly glorifies in yet another company in financial dire straits. It is biased and sensationalist and belongs in the Red Tops not on a BBC site.

  • Comment number 60.

    I have a subcontract engineering company and I wish my sales were down 3.4%. They are currently down over 30% and we are fighting like mad to increase sales. I employ 40 people and their future is a worry to me. If someone could offer me a break even position in 12 months, I would snatch his hand off. On top of this we are losing money with customers going out of business. Only yesterday, one of our longstanding customers went and left us with a £10,000 deficit. The government should stop messing about with stupidities like the VAT reduction and do something for manufacturing. Surely, now that the financial sector has shown itself to be worthless, manufacturing has to be the future.

  • Comment number 61.

    In times like this Robert your lack of worldly experience is showing.

    The key to a company's and this country's success will be the amount of debt it is running on and off balance sheet not the pre tax profits as peopel seem to think.

    Expectations of continuing boom conditions were too high so now the muppets who saw stratospheric growth are doubling up with doom and gloom.

    We need more transparency of government funding with Labour accepting teh National Audit Offices findings and companys not being allowed any more off balance sheet liabilities.

    Once we can see the extent of the damage it will not quite be a piece of cake to get it sorted but the full extent of the problem will then be attacked and sorted far quicker.

    Our biggest worries here are still the Banks and large Insurers, by definition they would naturally have the most diverse portfolios so all efforts must be made there to get the truth out in the open without it the problems will drag on far longer than they need.

  • Comment number 62.

    I refer to "angelbusman's" comment earlier who said "What do M & S staff do?".
    You really are ignorant to the amount of work involved in retail. My wife leaves the house every morning at 5-15 to work an 8 hour shift, 5 days a week and is exhausted by the weekend. She, like I, have to work these hours to make ends meet and I can assure you she puts in a full days work interrupted only by customers asking for advice. With the cloud of redundancies now hanging over all staff I would appreciate it if you kept your negative comments to yourself.

  • Comment number 63.

    If Marks and Sparks close stores it is going to hit small town High Streets pretty hard.

    Many smaller local shops rely on customers visiting small towns because shoppers have the 'big name' shops to visit. If there is no longer Woolies or M&S on your local High Street why bother going there? Go into your nearest big town/City.

    The closure of these stores is going to have a knock on effect for smaller shops and may change the face of some small town High Streets forever, and may even be the end of some small town High Streets, which will not encourage people to move to that area!

    This is something that no one seems to have picked up on as of yet.

  • Comment number 64.

    52. Guy Croft

    Good post.
    Those people who think Robert Peston is partly causing the recession are very naive, to say the least.
    The media does influence ecvents, but the severe economic events we are currently experiencing are much bigger than the media.
    We are facing very serious economic problems, and consumers cannot spend the UK economy out of trouble even if they tried.
    The next few years will be very hard, whether we like it or not.
    All we can do now is attempt to mitigate the problem. The ship has hit the iceberg and is heavily taking on water. Life boats are being lowered, but do we have enough lifeboats and are they well enough provisioned? Where will the rescue ship appear from, to pick up the survivors?

  • Comment number 65.

    If Marks and Sparks close stores it is going to hit small town High Streets pretty hard.

    Many smaller local shops rely on customers visiting small towns because shoppers have the 'big name' shops to visit. If there is no longer Woolies or Marks on your local High Street why bother going there? Go into your nearest big town/City.

    The closure of these stores is going to have a knock on effect for smaller shops and may change the face of some small town High Streets forever, and may even be the end of some small town High Streets, which will not encourage people to move to that area!

    This is something that no one seems to have picked up on as of yet.

  • Comment number 66.

    What a depressing article

  • Comment number 67.

    Dear Robert
    "SO WHAT" -, are cutting jobs, and closing stores, BUt what about the greatest Failure in Britain the Stock Exchange, ITS lost Billions of Pounds, yet no one hankers over that.
    This Down Turn will be the worse this country has evr experianced and M&S WILL NOT BE THE ONLY STORE TO FAIL IN THE EYES OF THE STOCKMARKET, who create the insecure trading oportunities due to expectation,
    Lets just be thankful that they are still trading, unlike Woolies, who were Failed by the Banks and the Stockmarket, as unworkable,
    The Banks Failed woolies, and they will fail many more Companies who they think are unsafe, due to Credit ratings.
    Dont forget, The banks themselfs FAILED BIG TIME yet no one goes after the Banks as having failed, and they are being propped up with tax payers money, ---"so they are still Failed."
    High Fianance and A STOCK MARKET that creates Uncertainty are the cause of Company woes, they make or Break a compamy in the name of Great Briatin PLC, because they are not performing properly. Above all that, the MAIN STAY of the British Economy are the SMALL BUSINESSES, who before this Debacle created by the Banks were more than holding their own, now due to the Banks, and the stockmarket uncertainties that are driving Britain PLC into the ground, more jobs will be lost.
    THE MAIN PROBLEM WITH BRITAIN TODAY IT DOES NOT HAVE A MANUFACTURING BASE, THAT COUNTS ANY MORE, THE MAJOR SKILLS OF TRAIN MAKING , SHIP BUILDING, AIRCRAFT ETC ARE ALL BUT GONE , THATS WHERE WE HAVE FAILED, and failed in a big way,
    So at the end of the day
    "WHERE HAS ALL THE MONEY GONE"?

  • Comment number 68.

    27 supercalmdown

    I answered your similar post re veg growing on yesterdays thread as follows

    "Time to consider the layout and design of a vegetable garden.

    Just a little work and a few seeds and you can have free veg later in the year"

    I am sorrry to say that you're wrong. It is an awful lot of work, especially to begin with, and only truly sustainable if your main focus is on improving your soil, not getting instant results. There is a good reason that retirees have the best veg plots and gardens, its partly the accumulated wisdom gained from experience but mostly due to the 6 hours a day they can potter profitably around in them!

    Also, IMHO out of town hyper/supermarkets are NOT the future; centrally-located outlets selling locally-sourced goods are.

  • Comment number 69.

    So it is tough out there on the High Street, the least fit are going to the wall and the sounder businesses are trimming their sails and battening down the hatches for the coming storm.

    The High Street to my mind is a bell-weather for the rest of the economy. It tells us about consumer confidence, how much money there is about and popular expectations. The suggestion is that these are changing.

    However, there is still money about and consumption continues. For many the recession so far has just been an inconvenience. This is the good news.

    The bad news is that the prevailing situation is only going to get worse. The government has taken the view that the more money it sloshes around this trend will be minimised making the recession shorter and shallower.

    This argument is missing the parallel with the USA. Christmas 2007 seemed very good for the US retailer: lots of sales, lots of discounting and so on. Sound familiar?

    One year on the USA is down deeper than last year. Next year we will most likely in the same shoes as the US is now.

    I know our government is hoping that Patrick O'Bama (hurrah for the Corrigan Brothers) will open the box to spend the money from 20 January and save the day as the US dollar charges to our rescue.

    I think not. Credit levels are in the graveyard and their resurrection is a long way off. So beware New Labour vampires.

    My suggestion is trim the sails, batten down the hatches, point the bow into the wind and beware the lee shore. Sorry about the nautical terminology but I am a natural landlubber.

  • Comment number 70.

    Hi
    Before you were famous for being a) right and b) ahead of the government. The comments section was, by and large, a sensible place for discusion. Now however the nutters have arrived in large numbers and it is nowhere as interesting as it was. I 'll still read you blog because it is good, thoughtful and reasoned but I'll skip the comments section

  • Comment number 71.

    I think Robert you have hit the nail on the head, it is internet sales that are propping up the high street, no expensive shopfront overheads and lower cost to serve will be the way forward for most companies.

    Woolworths failed to compete and with the exception of Pick and Mix online sellers such as Play and Amazon offered everything they did at a fraction of the cost form the comfort of the armchair.

    Next Online is profitable but is dragged down by their high street profile.
    You can buy designer quality clothing online for a cheaper price and now customers are becoming internet savvy, they shop around for online bargains.

    I am afraid this is evolution, adapt or die.

  • Comment number 72.

    We need a manufacturing base!

  • Comment number 73.

    What a truly terrible piece of journalism. Why not report the truth rather than sensationalism? In a recession how fair is it to report that like on like sales that show a single percentage drop from a bumper boom year is a "pretty dire", "truly disturbing" or other such ruthless words? Surely it shows a managed reduction in trade, that is over and above expectations for such a poor marketing period in a financial situation that was unprecedented?

    One only has to see how Mr Peston's reports affect share prices to judge just what this does to the countries economy - and having had two weeks of very little news of interest it seems shares were increasing likewise. Only now are M&S in a "disturbing" way even though Next weren't yet they were in a similar situation?

    Very odd indeed.

  • Comment number 74.

    #64 Mr Tweedy

    As a chief naive, I do, of course, disagree with you.

    However, even I don't blame Peston for the downturn/ slump/ recession/ crisis, but do hold the BBC to account for spinning and sensationalising the news and emphasizing the bad.

    All I ask is for balanced, un emotive reporting. Tad dull, perhaps, but simple and straightforward will do nicely.

    Thank you for accepting that "the media does influence events". The news is bad, true, but the Beeb's manner of delivery is adding to the overall sense of misery. And that IS affecting the economy.

    That is not the role of the BBC.

  • Comment number 75.

    Too much headline grabbing here - shock horror sales down 7% in a recession - well jings criven help ma bobbie!!

    Big business is driven by share value - all exec renumeration is based upon it - large scale institutions want increasing year-on-year share values. This is associated to above inflation dividend payouts.

    However to the vast majority of people surety of employment is the predominant need. Govt initiatives to ease cash-flow requirements within smaller businesses is the key to ride out recessions - small business is where it's at when it comes to the real economy.

    Focusing on large scale business - some of whom go to the wall irrespective of the economic conditions is a false way to look at the economy.

    The world is not doom and gloom - not armageddon - it's a downturn, it will hurt but nowhere near as much as mid-eighties, mid-thirties etc.

    Robert, you need to get some perspective - it's a boom-and-bust cycle - it's called capitalism - no escaping it - it's driven by people's greed and fear cycle.

    In other words - in our world this is normal not abnormal - it we start treating it as such we will all cope much better.

  • Comment number 76.

    Why the repeated references to the fact that the head of Next is a conservative supporter? You are trying to undermine his criticism of the government by suggesting that he is politically motivated.

    You should give his remarks more credit since he runs one of the largest and most successful retailers in the country.

    Instead of referring to him in the headlines as 'the well known conservative supporter...' you could equally say 'the highly respected retailer...'

  • Comment number 77.

    Why do people think Mr peston is only giving bad news. It is bad news.
    This talk of 1% down off a bumper high as a good result is a little hopeful.
    The recession only kicked in in October/November for many retailers, but M+S was hit a little earlier.
    So the news isn't too bad and we shouldn't worry? We are 6 days into the new year.
    Woolworths was not in a uniquely bad place that makes it the only vulnerable retailer.
    M+S are taking the first steps, much as Mr Peston has indicated. The underlying message is that there will be


    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 78.

    Still expecting a PROFIT of around £600 million.

    What would happen if they made a LOSS?

    Businesses needs to get a grip of reality here.

    It is impossible to keep expecting higher profits year on year.

  • Comment number 79.

    The retailers have had a decade of near year-on-year growth and were foolish enough to think that nothing could stop this trend. Pick your metaphor for M&S (and others): Cutting your cloth....Emperor's new clothes....Rose is a master of spin, but has yet to prove his mettle as anything but a "business as usual" CEO.

    Tone

  • Comment number 80.

    @64 Mr Tweedy,

    I must be naive then, one of the big problems in coming out of recession is restoring consumer confidence, if the likes of Robert Peston keep banging on about how bad it is then that only serves to further undermine consumer confidence making the recession longer.

    Nobody is saying that Peston is responsible for the original economic failings but his constant nay saying about pretty much every attempt to get us out of it coupled with his apparently limitless capacity to find the cloud in the silver lining is running the risk of crippling consumer confidence for a longer term.

    Whatever happens I'm sure Mr Peston's BBC salary is cushioning him quite nicely from the effects of the downturn.

  • Comment number 81.

    Someone must be making money, the stores that are rented are earning someone a lot of money, as they are not cheap, maybe that is something that can be looked at , as well as house prices being too high, I think commercial rent is too high.

    Of course this has nothing to do with you being able to have commercial property as a pension,

    that will be another bubble to burst , but at least that is a long term punt.

  • Comment number 82.

    Oh dear, yet again the usual suspects accusing Pesto of causing the downturn.

    It really is a load of oblate spheroids. If you look at the history of the last few hundred years, ( and I have, extensively,) you should understand that Bubble and bust are a regular feature of capitalism. The longer the bubble is inflated, the worse the ensuing bust. Every time it happens, those who question the sustainability of the boom are vilified. This often causes those who do understand keeping quiet to avoid taking the blame for the collapse.

    The problem with the financial system (not the free market in general) is that its structure facilitates regular insane orgies of speculation. These then inflate asset values to a point where their paper worth is far beyond the ability of the real economy to accommodate. The result is always a disastrous collapse, but those who get out early, or sell short, are vastly enriched. (This is an observation and not a moral condemnation.)

    Anyone who does not believe this is probably part of the problem. Please get yourselves better informed. Galbraith's "A short history of financial euphoria" is a good place to start.

    Then come back and apologise!

  • Comment number 83.

    @76

    It's called context, if he was praising the governments policies to the heavens and was a Labour donor would you be happy with him only being described as "a successful retailer"?


    Thought not.

  • Comment number 84.

    Ohh, come on people. Robert is telling like it is. If you want spin, sunshine and upbeat pep talks go and talk to Mandelson. Just keep telling it like it is Robert and those of us able to think through the issues and come to our own conclusions will do the rest.

  • Comment number 85.

    #24

    These comments are spot on:

    "We cannot continue to sell each other we have to increase our manufacturing base; it would be useful if government cuts tax to manufactures as if manufacturing increases there will be more jobs; these jobs will pay tax and benefits will fall. Over all the country will be better. "

    Service industries and retail are all well and good in a thriving economy but when the going gets tough they are the first to suffer. The bottom line is as a country we have to start being clever again and stop being so intellectually redundant in trying to make a living, because where we are going is not for the faint hearted.

    The easy days have gone.

    We cannot sit around and cut each other’s hair because that won’t cut it! (Pardon the pun)

    At the moment if it can be made on a machine then it can be made on a machine cheaper in the Far East. We have to design the machine.

    People need to get away from the 'they just copy it and produce it cheaper in the Far East mentality' While a lot of companies have made the mistake of selling their 'Crown Jewels' which is essentially their intellectual property rights that is not where it ends. Having a technical product which can be repetitively turned out is one thing, understanding it is another.

    This is where the West wins out. Because you are the designer you are effectively one step ahead and you are already adding 'whistles and bells' to your initial product which effectively starts to make your initial copied product out of date. The competition is always in catch up.

    From personal experience a huge Japanese Corporation with immense resources though it would just copy what my company (80 people) makes. It fell on its face big time. It now buys this product from us. Problem solving for people in the Far East is a small piece at a time. I would suggest they are not very good at it.

    In the West and particularly in the UK we have a 'quirky' approach to R@D which looks at the big picture and take the big steps. It may end up in smoke in which case the information and data to improve comes from the smoke. It can often end up with big technical advances. We have a culture of risk which comes from technical confidence. We laugh at the smoke and get on with the job. By contrast a honour based society like Japan has real problems with the smoke because their culture is to hide things and mask results to not lose face.

    We make some excellent and clever products in the UK and my own company is proof of that. Our real problem in the past was selling and developing them in the wider world but even on that front we are catching up rapidly.

    Encourage your kids to take those hard Science/Engineering based careers that hurt your head but will pay the bills in a future Britain.

    'Wishy washy' has gone and intellectual rigour is where it is at. Look back at our past because it is in the gene pool it is some thing we have always be good at, it just seems a lot of people have forgotten!

  • Comment number 86.

    Another lesson of history is that confidence cannot be recreated by "talking up" the economy. It does eventually return, but only when there is no more bad news left. We are nowhere near that point yet.

  • Comment number 87.

    Unless you advise the political party of everybody you quote (or religion etc), so we know where they are coming from, you have in my mind, I am afraid, lost much of your credibility. Perhaps we should now have a clear statement of your political views.

    Mr Wolfson was only expressing a view, as a business man, that seems to have been expressed almost unanimously by businessmen of all parties. My straw poll over the Christmas period of everybody we met did not find a single supporter for the VAT move compared with alternatives for the same cost.

    And just so you know I have voted both Consertave and Labour

  • Comment number 88.

    #82 and 84

    I feel I should apologise now.

    Obviously, I didn't make it clear enough - no one blames Pesto for the downturn and, no, I don't wan't upbeat cheery Mandy-esque news.

    I do want plain, unbiased, unemotive news coverage.

    Is that sufficiently clear?

    Or, in any way, wrong??

  • Comment number 89.

    Is it just me, or isn't anyone else blown away by the fact that (effectively) the whole population of UK visited M&S over the 10 days before Xmas?!

    OK, so it didn't help their numbers etc, etc, but that is just astonishing!

  • Comment number 90.

    "But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending."

    or they could have refunded everyone's television licence. Hey Presto instant 'Xmas' cash to spend.
    They could then waive next years fee.

    J.S.

  • Comment number 91.

    M&S still showing profits. Who believes that? Every few years there are scandals, Enron, Worldcom, Madoff who would believe these auditors? Work with your own money. Invest in yourself and your business. Do not be greedy. Just today another scandal "India IT boss quits over scandal".
    http://news.bbc.co.uk/1/hi/business/7815031.stm

    How can we tell every company in the world is not doing it? Even though the company is in India the same international auditors are auditing them. It has happened before so many times in other more developed economies like US.

    Throughout 1000's of years of human history in every religion Christianity, Islam, Hinduism, Buddhish, all have told us the same thing -- live within your means, only spend what you have, never look to generate more wealth out of your wealth, do not gamble with your wealth.

    There is no reason why a person/company will generate money for anybody else. I do not understand this business of making money out of money. Why would anybody make money for anybody else? Those who say that are liars and thieves.

    There is no reason why a person/company getting 1% of mutual fund money will generate money for anybody else. People who believe that investing a mutual fund and/or publicly floated shares or any financial product is going to make them money are living in a fantasy land propagated by the likes of "LUCKY MAN" called Warren Buffet.

    Similar to madoff scandal what is stopping companies to show the money raised from bond markets as profits? All accounts are cooked according to the recipe required by the senior management throughout the world.

    It is a "vice" to look for "return on your money" but it is a "virtue" to look for "return of your money".

    Do what Robert Peston does do not invest in any shares!
    Learn Learn Learn

  • Comment number 92.

    We are indeed now into 'Darwinian' economics-the fittest being those companies unreliant on lines of credit. Trimming of wastage should have happened months ago, and theoretically, a well run business shouldn't have waste.

    However, there will be a rocky period now, even for the 'fittest' companies, as their customers will number several 'unfit' companies.

    Credit insurance agencies will now be under pressure for payouts, and will also have already changed their credit criteria to reduce their exposure.

    Equally large businesses take upwards of 100 days to settle their accounts, and in some cases apply a discount to their debt (Boots) for example.

    I have one European customer who has now started taking 5.5 GBP off their invoice in lieu of their bank charges!

    So attending to your own housekeeping will not be enough. Widening customer bases will help, but GB needs to stop large companies putting SME's under pressure like this.

    Reducing income tax, corporation tax and national insurance contributions for SME's immediately would be very appropriate and would keep the life blood of this country going.

    Frankly, plc companies should be run responsibly - if not, they deserve a spanking.

    They're having to do what most SME's have already done. As it's on such a massive scale it makes the news!

    Robert being SME's into the spotlight a lot more-maybe more support will be forthcoming!

  • Comment number 93.

    75 and others - there seems to have been a surge in bloggers blaming media comment, mainly the BBC and especially Bob "Pessimist" Peston, for all our economic woes. This is all part of a normal recession, their argument goes, it was boom, but now its turn to bust. Those green shoots of recovery (i.e. the next boom) are being trampled by Robert's gloomy words.

    Guys, get real. As numerous others have already posted, there were specific historic circumstances (wars, technological leaps, under-developed resources and countries still to exploit/pillage) that helped us (i.e. the UK economy) recover from previous economic slumps, but that don't appear to be available to help us (this time round, meaning the World economy) this time round. Its hardly surprising that so many of us "doom and gloom "merchants are plying our trade!

  • Comment number 94.

    Ghastly, disturbing, unprecedented, worst performer etc etc. Quite a language you use to sensationalise the expected news. As a financial journalist did you have no idea what the figures were going to be like? Or this kind of reporting for the benefit of layman who probably are still not aware about the tough financial condition facing the economy? Overall UK sales are down 3.4%, considering we are facing a severe downturn which is affecting more or less all sectors and very tough trading conditions this is hardly a surprise but unsurprisingly its again very poor and patronising news reporting.

  • Comment number 95.

    52 Guycroft

    I agree with you, if it makes you feel any better.

    I post on here in the vain hope that somebody who is in a position to do something may read what I write, and give my comments some thought.

    Maybe just maybe they may think that I have a point, which has not previously been considered and think that some sort of action may be required.

    I must admit that I write more in hope than expectation but it does get things off my chest and acts as therapy.

    But just to get a few things off my chest, Please everybody and Robert included consider this.

    The government is just like any business or individual in that it must balance to a great extent the money that it receives (ie taxes) against the money it pays out.

    It is acknowledged that in August 2007 the government was borrowing money to fund expenditure at close to historical limits.

    This was in spite of massive tax revenues from fictitious bank profits and taxes which had been paid to the exchequer on all the money individuals had borrowed.

    In Roberts article THE NEW CAPITALISM he states that the treasury has lost forever perhaps 30 to 40 billion in tax revenues due to the city of london shrinking.

    I dread to think how much tax is being lost as a result of individuals not being able to borrow 40 billion ( a conservative estimate)each year.

    When 40 billion was borrowed I would guess (but would love someone to correct me) that the Government would have received more than 40 billion in taxes. These figures are per year by the way, not aggegated.

    My reasoning for this is that if the money is spent in a shop that initially there would be 17.5% tax on it. This money would then have gone to pay staff wages on which PAYE (30% tax on it) would have been paid. Corporation tax (30% ) will also have been paid on the profits. These wages would then have been used by the staff to go and buy things on which VAT would have been paid etc etc.

    I could go on and on and on about reducing tax revenues but people would stop reading.

    The point I am trying to make is that in 2007 that the country as a result of government overspending was nearly living beyond its means.

    Now that the money coming in is falling off a cliff and no attempt is being made to cut spending, we are definitely living beyond our means.

    Don't forget also on the spending side

    Unemployment benefit is increasing rapidly.

    Public sector pensions are currently outrageously unfair.

    We have a national health service which everybody wants to be free, yet every year costs more and more because there is always more and more that it can do.

    Continually burgeoning workshy

    Up above is just a taster but the main point can be summed up thus.

    IF THE COUNTRY HAD TO BORROW IN ORDER TO PAY FOR PUBLIC SPENDING WHEN ITS MAIN SOURCE OF INCOME WAS FUNNY MONEY FROM THE BANKS HOW ON EARTH IS IT GOING TO BE ABLE TO AFFORD IT NOW?

    We need more than just green shoots if there are any.

    The future really worries me

    All of those people who blog on here and criticise the doom mongers just try and answer in your own minds the above question.

    Where on earth is our future income going to come from.

    Every day goes by our costs increase and our income falls.

    At the moment we need to earn a fortune just stop the difference between costs and revenues getting any bigger

    This bit is now off my chest. Yes I am a doom monger but can somebody tell me a way out of this that doesn't involve putting my head in the sand and everything will be alright.

    Tell me how that works exactly

  • Comment number 96.

    Robert Peston - unfocused and immoderate (and unmoderated) in your comments again. As a PR briefing the media, I would never get away with such sensationalisation of the figures ...'a pretty dire story, truly horrible sales, ghastly news, pretty savage stuff' (reduced expenditure), etc.

    Given the context, the figures are nothing like as bad as this - get out among UK business people and do some objective reporting instead of riding on the crest of your own recessionary wave.

  • Comment number 97.

    Seperately

    Peston did not cause the downturn.

    The down turn was caused by people not being able to continue to borrow 40 billion each year against their houses to spend on things that were not needed.

  • Comment number 98.

    #52 Guy Croft -
    Another excellent post from you. I particularly agree with the following statements

    (1) I see no initiatives coming from any party that will encourage regrowth of the economy with 'non-internal' money.

    I think this is THE biggest problem facing us and the USA too. Ok, they may have a charismatic leader about to step on to the stage, which is more than what we have (or are likely to have, whoever wins the next election) but I just don't see anyone coming up with any radical solutions.

    (2) The socio-economic consquences of this spiral, well, they're obvious to me at least.

    This is what I keep thinking. Surely if tax revenues decrease, through inevitable rising unemployment, the unemployment benefit liability will increase. With this in mind, how can the government's vision of spending our way out of this mess actually work? There will fewer people with spare cash and those who are 'lucky' enough to have anything spare will be even more cautious with it than they are now. It really is a vicious spiral that could, in theory, lead to social unrest on a scale far bigger than the inner-city riots of the 80's.

    (3) All this guff about the UK being able to exist as a service based unit, barmy, completely barmy

    I've worked in the service industry for the past 13 years and I can see the downturn being far more than just a temporary blip for our industry and also for the other service industries that we supply to. This, again, has a spiralling effect. We have recently had to cut 10% of our workforce, even though we have a strong balance sheet with good cash reserves. We're about as streamlined on the workforce front as we can be but if we lose just a few more clients then I fear we will just HAVE TO make more staff cut backs. People talk about the housing bubble but I really do feel we have had a service industry bubble too. It was good for many, financially, while it lasted but it really has got a slow puncture now...and nobody seems to have a repair kit for it

  • Comment number 99.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 100.

    Robert it seems lots of the bloggers don't need any more info on the recession, they seem unconcerned with you single figure percentage drops in retail and the odd 100’s in redundancy.

    It’s the old story, when times are good it’s down to entrepreneurs and sound business leaders – and when it’s bad it’s scaremongering!

    Let’s all pretend it’s fine and sod those who lose their jobs – in short let’s shoot the messenger – and while we are at it have a word with the chaps in the Middle East Dept about their reporting of the issues in Gaza, their reporting must be stirring up some of the trouble! Tell them to find some good news...... surely the bloke that sells bullets is having a good year!

    Guys the difference between VERY good times and VERY bad times can be as little as +2 and -2 percent.

    It really was never going to a 50 percent drop and 20 million redundancies – but that doesn’t mean it isn’t grim out there!

    Buck up!

 

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