BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Retailers' mega squeeze

Robert Peston | 08:08 UK time, Tuesday, 5 April 2011

Good and bad news from HMV this morning.

HMV

It now expects profits for the current year to be even less than feared a few weeks ago: around £30m, down from £69m last year.

As for its market value, that is less than last year's pre-tax profits, at £65m. Or to put it another way, its 15p share price is an option that maybe it won't go bust.

In respect of its life-or-death negotiations with bank lenders, led by Royal Bank of Scotland and Lloyds, HMV says there is better news.

It has in effect gained another couple of months to secure a new borrowing agreement with the banks, because there has been a two-month extension to 2 July for the date at which its breach of its borrowing covenants will become a formal reality.

Anyway, you probably don't need telling that 2011 is shaping up into the worst period for retailers since the onset of the 2008-9 Great Recession, when Woolworths and Zavvi went kaput.

Just this week, Oddbins - the wine retailer - went into administration. Next has already spelled out the serious challenges ahead (though it still expects to grow profits marginally). And tomorrow Marks & Spencer will warn that the outlook is tough.

Back when the economy fell off that cliff in late 2008, retailers were bailed out by the massive injection of cash into consumers' pockets, when the Bank of England slashed interest rates to record lows and created new money on an unprecedented scale.

Coupled with a cut in VAT, millions of households received a boost to their disposable income. Although wages were flat, consumers suffered nothing like the peak-to-trough 6% per cent reduction in annual UK output or GDP.

Funnily enough, this year could feel much more like a recession for households, even though in terms of headline GDP the economy may continue to grow (albeit very insipidly).

The big weight is £1.5 trillion of household debt, which remains close to a record in respect of its relationship to disposable income. That £1.5 trillion is equivalent to around 150% of gross household disposable income, which is considerably greater than it has ever been (except in the last five years).

Back in 2000, after eight years of consistent and significant increases in consumer spending, the ratio of household debt to disposal income reached what was for then a very significant new high of 100%. But as a nation of shopping and housebuying addicts, we kept on borrowing.

That said, households have been saving a bit more since the economic shock of three years ago, and following their net dissaving of the boom years. But our slightly improved propensity to save has not been enough to make any serious inroads into that mountain of borrowing.

So households face a huge squeeze on their spending power this year - which means that weaker retailers face a horrendous time.

The quintuple whammy, so to speak, is of sterling oil and fuel prices at record levels, cotton prices that have surged, food prices that are rising, VAT that has already gone up and interest rates that are expected to rise this year.

When you combine all that with unemployment that is high and expected to rise a bit more, and salaries that are rising at no more than 2% to 3% on average - or half the rate of headline inflation - then you can see why so many of us expect to feel poorer in 2011.

Who has the greatest power over our sense of prosperity and the plight of our shopkeepers? Probably the monetary policy committee of the Bank of England.

As the Bank of England has itself pointed out, the sheer size of all that household debt means that it doesn't take a very significant rise in interest rates by historical standards for households' available cash to be squeezed to the parlous levels that took the UK into recession 20 years ago.

Comments

Page 1 of 2

  • Comment number 1.

    Unfortunately another example of cheap debt in the good times, coming home to roost when a significant technology change effecting the music retail business leaves it focusing on its debt rather than the business model

  • Comment number 2.

    "As the Bank of England has itself pointed out, the sheer size of all that household debt means that it doesn't take a very significant rise in interest rates by historical standards for households' available cash to be squeezed to the parlous levels that took the UK into recession 20 years ago."

    Allowing inflation to outstrip salaries by 5% every year will achieve the same result....

    Why is it, that all we ver seem to talk about is how to kick the can further down the road?

  • Comment number 3.

    Robert
    When is someone going to point out the obvious. Economic recovery in this country is dependent on consumer spending money. With incomes declining over the last few decades due to over accumulation of wealth by the few, and now inflation and debt repayment eroding what wealth the consumers have, we are soon are going to be in a position where only the rich have any money to spend. And that means no return to economic growth. The only way we could return to growth is for people to take on even more debt. But considering that was the source of money that fueled growth over the last 20 years and we are reaching the point of peak credit/debt that will not be a solution. The so called double dip will happen, and the governments plans will only assist the process.

  • Comment number 4.

    I'll be sorry to see HMV go as whilst I haven't bought music there for ages they do sell a good range of DVD's and games and the staff are always very helpful. But their stores don't set out to cater for the older shopper who may not have an ipod and who wants to still buy CD's. Like everyone else on the High Street it seems to be aimed at the young - which is the demographic that has deserted them. HMV won't survive by selling Val Doonican records alone but a broader appeal might help. As for the rest of the High Street, since TK Maxx moved into town that's where I buy most of my clothes and lots of other things besides - because there is a retailer with a focussed business model that works. Strange that no-one talks about them and the impact that they must have had - our local store is always packed with people and unlike other stores with fixed ranges, I'll pop in one or twice a week just to see what new stuff has arrived. Might not buy anything every visit but it is always interesting to see what they've got.

  • Comment number 5.

    On BBC Radio 5 this morning, just before 7am, it said that as the £ had depreciated by 70% the cost of petrol has risen because it is priced in dollars. The pound is close to a 52 week high against the dollar so I find it difficult to make sense of this mornings comment. Surely the petrol price should fall as the £ rises - not the other way around. Perhaps Robert could explain the apparent contradiction as I can make sense of what he says.

  • Comment number 6.

    Robert,

    "The big weight is £1.5 trillion of household debt, which remains close to a record in respect of its relationship to disposable income. That £1.5 trillion is equivalent to around 150% of gross household disposable income, which is considerably greater than it has ever been (except in the last five years)."

    Funny how no politician likes to talk about this, instead focussing on the national finances -which aren't that bad compared to; say 1945.

    What has happened is that during the boom years we actually all got poorer. Real salaries have been declining since the early 2000's so we borrowed more and more. Now we are told by the BOE that we need to become poorer - again!

    Ofcourse HMV will dissapear....

    'Next' by 2012 will see its customers shopping in Primark...

  • Comment number 7.

    It would be a shame if HMV went belly up, because it is the only place you can go to browse through and buy physical music. Supermarkets don't count, because if it's not in the charts, they won't have it.

    The business does need to change though, or it will go the way of Capitol Records.

  • Comment number 8.

    A huge deficit, record household debt, rising inflation, stagnant wages, job losses along with unprecedented frontline public sector service cuts.....looks bleak doesn't it?
    I have been 'harping' on about how angry we should be with the fact that when the financial sectors gambles don't pay off, the Government sock the cost to the people, either its own populous or that of poorer nations by way of 'recovery'.
    Give it until Christmas and perhaps the beleaguered 'head in the sand' British public will actually wake up to the fact.
    The irony of course is that so far as business recovery is concerned, more borrowing will be key. The Banks will (politically speaking) prove their 'worth' by providing the loans and the whole cycle will continue without breaking stride. This is how capitalism fixes itself with more of the same.......business as usual for the banks of course.
    A banking system built on a culture of greed, regulators asleep at the wheel, businessmen and industrialists whose primary concern is to shareholders and a public that is compliant with all of the above........so long as they can buy 'tat' they cannot afford and live beyond their means.

    There is nothing surprising here, move on.

  • Comment number 9.

    The good news for HMV passed me by - was it their ability to extend their indebtedness?

    General gloom and doom it is, with just the opiate of ciabatta and the royal wedding to displace the misery. Cant wait for 1st quarter GDP figures but what will the MPC do before they hit the fan?

  • Comment number 10.

    Much of the crazy lending was lent on the now very naive assumption that profits / turnover will always grow. People weren't interested in the businesses they had acquired apart from how much they could increase turnover, cashflow and EBITDA and therefore how much they could resell the business for, making a nice capital profit. No thoughts for the suppliers, customers or employees of acquired bsuinesses, but hey that's business. Just like buying a house, renovating it and selling it on, all works well with rising house prices, until somewhere in the chain someone gets left holding the baby with the soiled nappy.

    No matter how big the ego of the acquisitor this assumption became increasingly invalid, (from bitter personal experience of being acquired)

    - you can only cut costs by a finite amount

    - you can only increase turnover (volume and price) by a finite amount

    - therefore you can only increase capital value by a finite amount (the business is only worth what someone will pay for it)

    - you can only screw your customers by a finite amount (through rising prices, reducing quality, poor customer service etc)

    - unless you are very lucky / clever you have no control over external market forces, if the market changes there is pretty much nothing you can do, no matter how big your ego

    In terms of the high street the model seems to be that we will be left with a fairly homogenous bunch of traders, there is overlap between so many now. Everybody sells sandwiches, everybody sells newspapers, everybody sells books, everybody sells music, everybody sells computer games and so on and so on. (Woolworths (RIP) WHSmith, Boots, Superdrug, HMV, GAME, M+S to a degree, Waterstones etc)

    Comment on HMV is that now they are trying to sell so much, you can't see the wood for the trees. They also seem to have cut staffing levels to the absolute bare minimum. Personally still have a soft spot for them, would be a shame to see them go.

  • Comment number 11.

    Very bad news about Oddbins. I might have to restart making my own rhubarb wine!

  • Comment number 12.

    We've allowed our retail sector to become dominated by spiv developers, chartered surveyors and their upwards only rent reviews and service charge hikes, banks and more greedy developers and the business rate taxman ... and we've killed our historic tradition of market trading which for a nearly two thousand years was the back-bone of Britain's trade both domestically and internationally.

    Much UK trade and jobs has been and still is being killed by the tax man when a hardly anyone can afford a retail unit in these horrid new concrete mess shopping centres with their bright lights and their multi-national import spivving retailers and credit card machines.

    Many city centre markets are controlled by left and right wing local authorities who have allowed real open air markets to be over-built by greedy developers for new shopping centres. Some city centres are near deserted because of the way that town hall bureacrats operate medieval market laws with a pile of licence fees, regulation and other red tape.

    Modern retailing has caused inflation and higher prices in the UK retail economy for both operators and consumers ... and whole thing is unsustainable and many retail units will be coming empty as the UK domestic economy is driven into the floor by a lack of everything by sucessive UK govts ... but importing of anything and everything.

    Towns, cities and villages need a great deal more market facilities ... and less extortionately high priced, bank spivved, Chartered Surveying messes!

    If the Coalition govt is up for a big society ... let us have street vendors/market traders on every street corner ... that is the ultimate big society ... a street vendor/market stall operators going out each day selling their wares and not being pestered by retail town hall snoopers ... and supporting themselves and their families and cutting costs for everyone ... and providing community service.

  • Comment number 13.

    Thought this would be fun. Having been brought up in the 1950's and can remember buying sweets with a ration book in hand, I am bound to think that luxuries are now regarded as essentials. Here is a list of 10 (in no particular order).
    1. Any car valued over £15,000-especially 4 wheel drives.
    2. Hair extensions
    3. Stag nights in Budapest-or anywhere for that matter
    4. Houses in the country-and TV programs that promote them.
    5. Ironing services
    6. Conservatories
    7. Disney
    8. Celebrity Magazines
    9. Reality TV phone voting
    10. Valet Parking at airports

    We consume for the sake of consuming. Time to stop. I know this will wreck the economy but life will go on!


  • Comment number 14.

    [[[5. At 09:03am on 5th Apr 2011, georgeb wrote: ]]]

    Hi George I am not sure where your 70% sterling depreciation came from as I didnt hear the BBC report? But fact is that in 2007 pre CRASH the £ was trading at $1.94 and is now $1.61 so thats an 18% depreciation if my maths is correct.

    At the time when the £ was $1.94 in 2007 Brent Oil Spot was about $60 (and ignoring the panic spike in 2008) dropped to circa $40 in jan 2009. Since then it has climbed unsteadily to over $100 per barrel. Thats a 2.5 times price hike so the 18% sterling depreciation isnt that significant.

    Also remeber tha price of petrol is just a small % of what you actualy pay at the pumps the rest is down to our dear friends in Westminster.

  • Comment number 15.

    The only solution I can see for HMV , is to go bust , take the business online , with the exception of a few high profile shops & sell Waterstones to the highest bidder . At the least the brand lives on ..

  • Comment number 16.

    [[[12. At 09:35am on 5th Apr 2011, nautonier wrote: ]]]

    I quite like the sentiment but I am not sure everyone involved in the new developments is a spiv. Like it or not the developers are clearly catering for real demand. One only has to visit some of these dreadful Americanised Malls to see that they are very popular. Maybe a better solution is to combine the two concepts and also encourage parking in city centres as this more than any other factor is why the Malls are so popular (in a word they are very convenient) and city centre shopping is such a pain.

  • Comment number 17.

    A bad year for retailers: its a worse year for consumers!

    The question remains, where will the growth come from. If we look at the four elements of GDP, it's clearly not coming from growth in consumer spending. Nor, despite the much trumpeted growth in manufacturing, is it going to come from exports: last time I looked we still had a large (and not improving) trade deficit.

    Item three then? Government spending is not going to be much help - despite the fact that the much trumpeted cuts are not actually a reduction in government spending. Which leaves us with private business investment: so come on, step up the private sector.

    No?

    So just a lot of trumpeting to take our minds off things.

  • Comment number 18.

    [[[15. At 09:56am on 5th Apr 2011, hughesz wrote: ]]]

    Hi Hughesz; HMV is already online big style as is Waterstones so your suggestion isnt going to be a big help I am afraid.

    The fact is the high street retail business model for commodity products which are cheaply deliverable to the home will no longer work. HMV et al were too slow to see the change coming or just too stuck with the retail estate and like the Dinasours will disappear and take their landlords and debt holders with them.

    The quicker they all take the pain the better for what is left rather like the UK financial problems.

  • Comment number 19.

    Surely the lessons of Oddbins and HMV have nothing to do with household debt nor excessive business borrowing.

    Fact - households are still buying music, dvd's and wine.

    Oddbins and HMV had/have poor business models (which no longer meet customer demands) and weak management.

    Those who bemoan the end of traditional shops and blame anyone and everyone for the demise of open air markets should look at little closer to home. Had they all refused to shop in supermarkets then supermarkets would have failed. It is a pity that we have lost the concept of personal responsibility

  • Comment number 20.

    "As the Bank of England has itself pointed out, the sheer size of all that household debt means that it doesn't take a very significant rise in interest rates by historical standards for households' available cash to be squeezed to the parlous levels that took the UK into recession 20 years ago."

    = = = = = = = = = = =
    Perhaps that's why people are concentrating on repaying - natural when you think about it. Problem is, in bad financial times people tend to buy what they genuinely need rather than what they pretend they need or mere frippery, which is what our government wants us to spend on. It's where inflation genuinely hurts: food costs about 15-20% more than it did 2 years ago, energy bills have risen by about 20% in the same time - and the oil price afflicts us all more than filling a car tank - everything we buy that's hauled is more expensive.

  • Comment number 21.

    Well I've frozen salaries for the last three years now because we're all in this together.

  • Comment number 22.

    Even if HMV re-invent themselves, they cannot control the amount of passing customers which is based on whether average consumers have decided to go to the town centre for a shopping trip. And I am finding less and less reason/need to use our town centre, as are many others.

    I was in a massive Currys the Saturday before last, and it was practically empty. Just staff in small groups talking to each other, clearly bored with no shoppers. The massive isles of laptops with no-one there. The whole white goods area also seemed deserted. So it wasn't surprising to see the profit downturn announced last week by them.

    I cannot be alone in wondering if petrol will be £1.50 a litre by the summer. All our discretionary spending is pretty much on hold, as being self employed in this environment makes future income very unpredictable. So I imagine others too are holding back spending they would be making if only they felt more confident about the rest of the year. But unfortunately this then becomes a self fulfilling prophecy.

    Fortunately it is possible to be content without consumption excesses. Maybe our nation will find its soul again. But that may not be good for the GDP figures.

  • Comment number 23.

    If profits are around £30m how are they still in trouble or is that not the true state of the company?

  • Comment number 24.

    It grieves me to say this but we are bankrupt: both private as well as UK govt debt are beyond what we can afford to pay back and there is no scope for more borrowing to get us out of this mess.

    As a supporter of Keynesian economics, it comes as a very very hard shock to find that we did not do as Keynes expected and that is to save and pay off debt during good times so that the capacity to borrow would be there in bad times and the times are now very bad indeed. During the boom years we broke all rules by massively increasing our debt so that there is now no further scope for increasing debt.

    Whether or not you agree with me, the situation is close to disaster, especially if you consider all the off-balance sheet government debt, the massive rate of increase in government borrowing month on month since the election, the enormous size of bad debt that is being delayed by banks deferriing mortgage defaults and the massive potential bad debt that is in the pipeline as interest rates rise pushing hundreds of thousands of households into default, etc. etc. I could go on but this is already too depressing.

    We are facing a retrenchement in consumer spending that is if anything far less than required by most households. The fact is that the whole of the UK enconomy was working on steroids and speed to pour all its wealth into the massive increase in property values into many more multiples of average salaries. Unless house prices and the debt associated with property is brought back to a more sensible ratio to the salaries and productivity of ordinary households, we are facing a Japanese style period of deflation or stagflation. That means defaulting on existing debts, slashing house prices, making sure that house prices can never again suck all the wealth out of our economy and defaulting on government debt.

    We have no way out. If the politicians were really honest with us it should lead to a total collapse of confidence and default on private as well as government debt.

    We are absolutely in the same position as Portugal Italy Ireland Greece and Spain and preventing a default is probably a worse prospect compared to trying to live with a debt that we cannot afford. The impact on the economy and our standard of living will be much worse for far longer.

    We simply cannot afford the debt we have accumulated and however horrible the prospect it may be that the most responsible response to our irresponsible spending is to default and start from scratch to rebuild an economy based on real activity, people doing things that add value, instead of invented financial froth.

    Our choice is either decades of misery suffering the death of a thousand cuts enduring a stagnating economy and ever more expensive debt servicing costs, or a few years of pain by defaulting and rebuilding our economy and financial services industry.

    Does that mean that the High Street spending should stop? Yes

    Does that mean that our consumer spending habits have to change radically creating a very different type of High Street? Yes

    Can we avoid either private and public default or years of stagnation? No.

    Should we be angry with the banks? Absolutely and if that means letting them debunk somewhere else, then the sooner the better.

    If having the most repugnant gluttonous greedy self serving and venal pigs of bankers in this country has cost us our future for many generations.

    What is unbelievable and unforgivable is that they are trying desperately to ensure that they can continue to create the conditions for another worse crisis. This then is a group of criminals in an industry that we can only wish on our worst enemies. LET THEM GO and leave us in peace to set up banks that we can trust and which serve ordinary people and ordinary businesses which work hard to add value.

    Forgive me for this most dispiriting message, but until and unless we truly grasp the extent of the danger and damage to our economy, we will never restructure and reform so that we can once again make and do things that people want, need and are willing to pay for. The Banks have destroyed more wealth now and in the future than any other single act of human folly in the whole of human history so they should not emerge from this in their current form lead by the same people.

    As for the High Street, frankly the pain there is only going to be the tip of the iceberg and they too have to play their part in bearing this country's awful burden.

    What we need now is to recognise that this threat to our survival requires us to have the same attitude as we did during the second world war and that is to unite, sacrifice for the sake of the greater good and be prepared to destroy our enemies in order build a better world for our children and their children's children

  • Comment number 25.

    #12 Has a point underneath his silly language. The biggest drag to enterprise in the UK, either retail or commercial, is the UK commecial lease and the people (Pension funds etc) that control them.

  • Comment number 26.

    10. At 09:22am on 5th Apr 2011, EazilyGrizly wrote:
    Much of the crazy lending was lent on the now very naive assumption that profits / turnover will always grow. People weren't interested in the businesses they had acquired apart from how much they could increase turnover, cashflow and EBITDA and therefore how much they could resell the business for, making a nice capital profit. No thoughts for the suppliers, customers or employees of acquired bsuinesses, but hey that's business. Just like buying a house, renovating it and selling it on, all works well with rising house prices, until somewhere in the chain someone gets left holding the baby with the soiled nappy.

    No matter how big the ego of the acquisitor this assumption became increasingly invalid, (from bitter personal experience of being acquired)

    - you can only cut costs by a finite amount

    - you can only increase turnover (volume and price) by a finite amount

    - therefore you can only increase capital value by a finite amount (the business is only worth what someone will pay for it)

    - you can only screw your customers by a finite amount (through rising prices, reducing quality, poor customer service etc)

    - unless you are very lucky / clever you have no control over external market forces, if the market changes there is pretty much nothing you can do, no matter how big your ego

    ..........
    I think this is what WOTW referred to as the tendency of profit to diminish. A 'flaw' of capitalism I believe.

  • Comment number 27.

    What a great blog, at last some individuals who can see the 'we are all in it together' lie. Sadly we have become a nation of spivs, where large companies (and individuals) see customers as merely 'marks' who can be used as much as possible to increase profits. There has been much talk about oil prices and the value of the dollar relative to the pound, but the reality is that oil companies price fuel at the maximum price they can get away with, a bit like the power copanies really, most of course are foreign owned because in the UK they can get away with a price structure that would be unacceptable in their own countries. I saw a news programme on the BBC about Coventry which they intend to see if the Governments view that private companies would take up the unemployed from the public sector is correct. in the first programme they stated that this may be correct because a company making body parts for Aston Martin had hundreds of vacancies. The MD of this company stated that the reason for this was 'the unprecidented demand for luxury items in this country', has anybody asked why?, I thought we were 'all in this together'?

  • Comment number 28.

    Another company that will not be taking advantage of empty library premises?

    Austerity leading to growth not working in this case or yet anywhere?

  • Comment number 29.

    Robert P. wrote

    "As the Bank of England has itself pointed out, the sheer size of all that household debt means that it doesn't take a very significant rise in interest rates by historical standards for households' available cash to be squeezed to the parlous levels that took the UK into recession 20 years ago."

    But they are almost entirely wrong!

    They(the BoE's economists) do not comprehend the lesson that BECAUSE of the almost free money (low interest rates) people are paying off debt at unprecedented levels. This fact (see today's news) should show the Idiots of Threadneedle Street that their models of how the real economy works are fundamentally flawed.

    Their model says: reduce interest rate and people will borrow more - yet the opposite is happening. This can only mean that the price of having debt has become very much higher than the almost free price of money. The market has spoken. (And spoken in support of my theoretical model of the price of money!)

    To get out of this (catastrophic) 'money price trap' the Bank of England must raise interest rates substantially ASAP.

    (See the current Stephanie Flanders's blog for a detailed discussion)

  • Comment number 30.

    [[[23. At 10:21am on 5th Apr 2011, cross48 wrote: ]]]

    £30m profit when the company has about £450m of debt is not good news and it has been getting worse since 2007 when shares price was 128p or thereabouts and is now about 14p. Only one way to go for this company unless the debt holders think an equity swap is a good idea and their landlords are happy to drop the rents

  • Comment number 31.

    I have never understood why economists think that 'growth' comprising increased consumer debt, increased imports, declining balance of payments, spending on unnecessary cheap consumer goods imported from China, increased exports of rubbish to China, increase in low paid boring retail jobs, unnecessary use of earth's resources in commodities, machinery, shipping etc, can be a good thing.

  • Comment number 32.

    #24

    I agree about household debt being the problem, I dissagree about the nations finances being as bad as the PIGS....

    Have a look at what our debt was in 1945 and tell me why you think it is worse today and the need for default?

    The difference is the private household debt...

  • Comment number 33.

    I am playing music on excellent LPs and two excellent turntables or listening to the radio. LPs can be bought very cheaply in Oxfam bookshops or at other charity shops. There is no need to go to HMV either because you can,according to my son, listen to almost anything, legally, via a subscription to Spottify.

  • Comment number 34.

    [[[24. At 10:25am on 5th Apr 2011, UK inc is bankrupt wrote:]]]

    Your article is probably factually reasonable but pessimistic and a little extreme. Some of the things you suggest would positively harm the country for many years e.g. defaulting.

    There are absolutely NO short terms fixes. Its rather like putting on weight it happens very slowly and generally the solution, a diet, also works very slowly. Short terms fixes rarely work in the long term.

    Time and inflation will help the necessary adjustments. But the fact is we have to become less dependent on unaffordable government expenditure and become a more productive economy. That means means labour costs (I include management costs in that phrase) have to reduce and productivity needs to increase.

    Attuitudes have to change; more personal responsibility, less of a dependancy culture and a greater work ethic will eventually turn things around.

    See you in 10 years time, maybe more.

  • Comment number 35.

    The way the personal debt has being recorded seems like a governmental back of a fag packet way of working it out. Sorry, fag packets are a poor mans term for well worked out figures.
    The point is more that most workers have had pay cuts, not a freeze in pay along with more personal tax, no interest on savings huge rises above inflation in food, fuel, VAT, materials and goods then we are told we are in this together. My **** we are.
    And suddenly the government finds that there is enough cash in the country to borrow to lend to Ireland and then fly off for another war without an end. Then, presumably pay for reparations on the collateral damage caused.
    Funny the view from London looks so rosey

  • Comment number 36.

    16. At 10:00am on 5th Apr 2011, ObserverinMonmouth wrote:

    [[[12. At 09:35am on 5th Apr 2011, nautonier wrote: ]]]

    I quite like the sentiment but I am not sure everyone involved in the new developments is a spiv. Like it or not the developers are clearly catering for real demand. One only has to visit some of these dreadful Americanised Malls to see that they are very popular. Maybe a better solution is to combine the two concepts and also encourage parking in city centres as this more than any other factor is why the Malls are so popular (in a word they are very convenient) and city centre shopping is such a pain.

    ...................
    Our country is riddled with American style malls with same shops/retailers in most of them. City centre or malls the effect is the same expensive and over built monstrosities that have killed off market stalls and made everything more expensive ... as the import spivs rake in the super profits on our UK imports.

    Well I'm sure that the greedy landlords are bank bloated spivs as I've dealt with them and their tenants for 30 + years ... and their houses of cards are too expensive and built on too much debt (hence the generous low CGT to reward them for killing off our retail markets).

    What is the real demand ... the real demand is from mind melting, non-stop 24/7 day advertising and the demand comes from bank propelled access to credit card debt ... to pay for the bloated super expensive shopping monstrosities that have killled off most of our real local shopping... whether its a mall or an expensive high street shopping zone.

    Sorry but combining the two concepts will not work in my opinion and indeed... it has already been tried ... and leads to a larger expensive mess.

    The concepts need to be shelved ... the constant stream of discounts and delas on shops before they go out of business shows the problem ... the UK needs more low cost, market and street trader shopping ... real retail and real shopping without the middle men 'spivs' ... although some of the market retail traders are genuine spivs 'wheeling and dealing' at their stalls ... these are the only spivs that we need.

  • Comment number 37.

    So HMV is in trouble? Hardly a surprise and much of it due to whatitsname, you know that big river in S. America..

    But not all I suspect. My town centre used to be crowded, even last year it was crowded. Now it isn't; I've just been there and it is ghost-like. Shops that had been there ever since I remember have just shut up and are empty.

    When GO announced those growth figures, revised downwards, it was interesting to watch Cameron's eyes staring at the back of his Chancellor. Maybe we too will soon see the back of this Chancellor and he will indeed GO.

    I am hearing only bad news, and not only on Radio Africa.

  • Comment number 38.

    "Funnily enough, this year could feel much more like a recession for households, even though in terms of headline GDP the economy may continue to grow (albeit very insipidly)."

    Headline GDP? That's largely financial services profits, no?

  • Comment number 39.

    It's clear we have run out of options when it comes to a short-term kick-starting of the UK economy. The government/BoE have no means to artificially encourage growth, and consumers are broke.

    So what's it to be? Ministers have made up their minds and pushed the reset button: a painful corrective measure that will sweep away the underlying cause of our problems (debt), leaving us (eventually) with a ground zero from which to build anew.

    The short-term horrow show is an unavoidable consequence. Retailers like HMV will be the victims. Whether we'll be better placed down the line remains to be seen.

  • Comment number 40.

    24. At 10:25am on 5th Apr 2011, UK inc is bankrupt wrote:
    It grieves me to say this but we are bankrupt: both private as well as UK govt debt are beyond what we can afford to pay back and there is no scope for more borrowing to get us out of this mess.

    - Pay back? Whatever made you think that the government intended to clear the debt? It doesn't it wants to decrease the deficit not elimiate the deficit and certainly not pay the national debt off. HM Treasury still owes bond holders for the Napoleonic wars. It's cheaper to pay the interest than clear the debt you see. It's something to do with inflation, a good example is that a graduate in the 1970s started on £2k a year. You couldn't employ someone illegally on that today!

    We have no way out. If the politicians were really honest with us it should lead to a total collapse of confidence and default on private as well as government debt.

    - Well if you are right let's hope that politicians aren't honest so we can build confidence.

    We are absolutely in the same position as Portugal Italy Ireland Greece and Spain

    - No the UK is not in the same position as these countries. Have you been to Ireland recently? The banks lent one doctor a billion euro! His salary was €120k p.a.
    We simply cannot afford the debt we have accumulated and however horrible the prospect it may be that the most responsible response to our irresponsible spending is to default and start from scratch to rebuild an economy based on real activity, people doing things that add value, instead of invented financial froth.

    - At last some good old fashioned left wing rhetoric! Only jobs that build real value should be retained! We will all wear blue uniforms! So hairdressers are out as are doctors, police, pilots, soliders etc. Personally I can't wait to see the back of hairdressers as they are all parasites that add no social benefit.

    Does that mean that the High Street spending should stop? Yes

    Does that mean that our consumer spending habits have to change radically creating a very different type of High Street? Yes


    - Well if High Street spending stops then we would expect a very different high street, one where all the shops are closed! What the UK needs is growth - stopping spending on the High Street would cause the opposite. The best thing to do for Government finances would be to grant Scotland and Wales independence. You could keep your libraries open then.

  • Comment number 41.

    To call us a nation of 'housebuying addicts' fails to take into account the simple fact that we all need to live somewhere. We are only 'addicted' to buying property because that is the only choice open to us...The banks know this, as do the government. Unrealistically high house prices are put down to supply and demand, but who controls the supply? Will the supply of homes ever be increased relative to demand if it means the price of housing would fall? Don't hold your breath...

  • Comment number 42.

    the obvious answer, sack the board, they havent a clue, are they all idiots in the HMV head office, it certainly looks like it, and the people who are suffering are the hard working guys in the stores, doing their best to sell the music and any money generated is blown away be stupid hair brained ideas by people who havent a clue.

  • Comment number 43.

    [[[27. At 10:43am on 5th Apr 2011, Terence Bullard wrote:]]]

    I dont think there is any great conspiracy with oil pricing; oil is traded globally not simply pirced by the producer. As far a petrol/diesel prices at the pumps is concerned I think you will find the majority of the price is taxation and nothing to do with those nasty foreign oil companies!

    With regard to Aston Martin I can tell you for certain that just two years ago they were on their knees and even had some of the skilled workforce making furniture to keep them employed. The fact that they are now being succesful means a few thousand of their cars rather than a few hundred are now being sold and we should applaud that as it creates employment. I am not sure who the buyers are and maybe they include all those over paid University Vice Chancellors featured on TV last night or some of the hundreds of Council CEO earning more than the PM. One thing I am sure of is that the buyers will not all be bankers and other so called spivs.

  • Comment number 44.

    HMV has to support the cost of its high street presence, which many of its competitors (amazon etc) do not have to do. Then again it is all relative - I bought a 5 DVD box set from HMV for £10 last friday only to find I could have purchased same for £5.99 from Amazon. More and more people are using the power of the internet to identify such savings given the aforementioned financial pressures.
    Where does this leave us? I have a friend in the specialist electronics retail business who though doing exceptionally well (sales have grown through the recession and continue to accellerate) fears for the future of shops to visit. He goes out to install equipment in customers homes and often finds they have purchased other equipment over the internet which he then needs to get to work with what he has sold. He does this and develops a relationship and repeat business. Problem is internet providers are price based and do not add any specific value to the purchasing experience. Result? high street retailer dissapear.
    Given financial pressures I struggle to see what can cause the economy to accelerate away into the distance any time soon.

  • Comment number 45.

    HMV operates in a mature market selling ordinary consumer products so why on earth does it have such high overheads and debt? And why has any financial institution lavished savers' money with HMV? The banks which have financed HMV look to be the usual suspects, ie the ones whose financial gullibility made them effectively bust and fall into the hands of the government.

    I have no sympathy with business models for consumers, businesses and governments built on long-term debt, ie spending other people's money. Until people, businesses and government learn to spend roughly what they earn each year we will consider to have massive problems.

  • Comment number 46.

    [[[31. At 11:03am on 5th Apr 2011, mosman2 wrote: ]]]

    So what is the practical implementable alternative if the population is growing and people's expectations are for an improved standard of living?

  • Comment number 47.

    No problem. We can all just borrow more to solve our errm... debt problem. As a nation we're borrowing more and as individuals the government wants us to borrow more. The OBR forecast that overall household debt rises from £1.62 trillion last year to £2.13 trillion in 2015, or from 160pc of income to an astonishing 175pc.

    In other words, consumption growth, a key part of the OBR's overall forecast for growth, is only maintained by taking on more debt.

  • Comment number 48.

    24. At 10:25am on 5th Apr 2011, UK inc is bankrupt wrote:

    I would say we are insolvent rather than bankrupt, but I agree that only through distruction of the debt will the UK recover. Both the Government and the opposition are deluded if they think growth will come out of thin air to save us, and yet the only solutions being presented, cut fast now, or cut later, both depend on growth to return to work. The only alternative to debt destruction is dropping our debt based monetary system, along the lines of Positive Money's proposals, which would allow debt to be repaid whilst maintaining spending. The 'normal' approaches will not work.

  • Comment number 49.

    [[[35. At 11:14am on 5th Apr 2011, barry white wrote: ]]]

    So what was the alternative do nothing? I am sure the Arab league and the Libyan rebels would have said a big thank you to that. Ignoring the political issues there are some things which transcend pure economics and trying to help others who are in a life threatening situation must be one of those if we are to remain human.

  • Comment number 50.

    #32 newblogger wrote:

    I agree about household debt being the problem, I dissagree about the nations finances being as bad as the PIGS....

    The difference is the private household debt...

    ---------------------------------

    What constitutes a household?

  • Comment number 51.

    The UK economy will continue its decline. The so called boom years were wholly funded by borrowing and that debt will absorb much of the UK's personal and business income. Manufacturing cannot grow in the UK, even with a declining currency, due to ever more environmental laws and cost of employment being imposed by government here yet not on our competitors. Government talks about UK manufacturer productivity needing to be raised to be competitive but fails to see that the UK government needs to adjust laws and taxes to make manufacturing competitive in the UK.

  • Comment number 52.

    [[[45. At 11:42am on 5th Apr 2011, geoff hughes wrote: ]]]

    So you dont have a mortgage then geoff?

  • Comment number 53.

    "32. At 11:04am on 5th Apr 2011, newblogger wrote:
    #24

    I agree about household debt being the problem, I dissagree about the nations finances being as bad as the PIGS....

    Have a look at what our debt was in 1945 and tell me why you think it is worse today and the need for default?

    The difference is the private household debt..."

    And of public debt the problem is the massive increase in demand in what we are entitled to or think we should be entitled to as a basic right irrespective of how much it costs or how unaffordable it has become now as opposed to waht was on offer in 1945

    Social Security
    Healthcare
    Education
    Law and order

    The list goes on - it exacerbates me every time someone comes on the TV/radio arguing for more money for this or that part of the public sector, or vehemently defending their fiefdom from any sort of cut. They should be mde to account for the money given to them if they want an increase in funding or not to see any reduction - it's so childish. Cake today and cake tomorrow it's just we don't want to bake any just but from the shops...

    The whole public sector is a ponzi scheme with ageing population virtually no one is paying enough in for waht they expect to get out in a lifetime

  • Comment number 54.

    Robert,

    Things are much worse than your figures suggest. £1.5tn of household debt equating to 150% of disposable is based entirely on current interest rates!

    Be warned. When interest rates do start rising. Many households will simply fall of a cliff.

    This idea being pushed around the media that household debt is being paid off is simply not true. A relatively small number of better off people have taken advantage of the very low mortgage payments and paid off large amounts of their debt in preparation for what we all know is coming. Most people and especially those who are trapped in interest only mortgages (effectively tenants speculating in the property market) have only stayed afloat because of the very low rates. They are maxed out on every possible facility and have no means of expanding their debt further. No bail outs for them. Just less money each month to buy ever more expensive food.

    These media observations are simply recognition of the powerful undertow effecting our economy and should not be mistaken for the tidal wave rushing in from sea. How blind does one have to be not to see all this.

    Why else do you think the Bank Of England have sat about for 3 years trying to convince themselves and everybody else that their inflation models work while their heads remain burried deep in the sand.

  • Comment number 55.

    These are indeed desperate times, aren't they?

    Those without spare money are cutting down on non-essential spending (at places like HMV, Oddbins etc) rather than flashing the plastic and increasing their personal debt for merely "nice-to-haves".

    Those with money to spare are using some of this to reduce their debt levels. Isn't this what we need?

    If interest rates are increased then we will merely move those from the second group into the first, whilst tipping those already in the first group over the precipice.

    We are unlikely to see increased demand for nice-to-haves in this country for a number of years until the level of personal debt has significantly reduced. Consequently, businesses reliant on sales of these goods need to look to new markets or cease trading.

    As a nation we need to support new businesses that provide products and services which we can export, to bring money into our economy.

    Unfortunately the prudent, who have not accumulated personal debt, can not sit back with smug self-satisfaction, because the devalued pound, increased inflation rates and falling asset values will effect us all until the British economy is reshaped.

  • Comment number 56.

    #24, re last paragraph,

    .... never in the field of financial deception have so few profited at the expense of so many!

  • Comment number 57.

    High street traders are for the first time in many years facing product costs rising, they have sold off and rented back property , reduced staffing, and were able to source product overseas ever cheaply..... that has now ended.

    The massive injection of money QE has allowed the banking elite to now target commodity's this is what is driving our inflation up and as long as interest rates remain punitive the situation will continue, so we will just have to get used to it.

    Until the banking system is brought under control there is no end to this we are not at the bottom of the crisis yet, indeed i fear we are a long way off it.The tinkering with the budget pails into insignificance when at the drop of a hat all the supposed savings from cuts can be wiped out by having to support bailouts of other countries.

  • Comment number 58.

    Looking at HMV financials, they are operating on extremely tight margins and cashflows. The problem is not so much the leverage but the fine margins they are operating on and the sensitivity of these to small changes. They have grown sales relatively consistently but not profits.

    Would compare it to trying to balance an elephant on a pin, theoretically possible but the slightest gust of wind and the whole thing falls over. For example, o

    The current economic siuation isn't helping but you have to wonder about the viability of the particular HMV business model before lumping others in the same boat.

  • Comment number 59.

    How about allowing the UK economy and society to be controlled and dominated by a small elite of billionaires, some British, none of whom pays much by way of tax in the UK or anywhere else, who typically enjoy themselves on the world's best slopes, beaches, lakes etc.? That should sort the problem.

  • Comment number 60.

    Truth is that most people aren't supportive of a company which has been vastly overcharging for a number of years. Besides that fact HMV will always talk about their "range" of products - but go check it out, yeah brilliant music range, but half their stores have upwards of a hundred different types/colours of HEADPHONES.

    Clearly they went all out on putting Zavvi out of business when it was clear they were being helped with private investment when the reality is they should have concentrated on the Supermarkets who are now making HMV look very very silly on all fronts.

  • Comment number 61.

    Tragic for the staff of HMV who might lose their jobs but wholely foreseeable as a result of the economic rent extracted from the business.

    Too high rents paid to banks and pension funds who own our high streets.

    Too much debt taken on in the interests of financial engineering primarily to generate juicy fees for the banks and the appearance of a very capital efficient retailer.... which was in fact just more risky as a result.

    Poor regulation that allows online retailers to base their operations in tax havens giving them a huge VAT and tax advantage versus retailers on the ground.

    Retailers should never be allowed to take on so much debt again by their owners and directors. They are service companies and should be funding their businesses from the credit provided to them by suppliers as an outlet for their goods.

    As many others have noted, we somehow forgot this golden rule and the only beneficiaries seem to be the financial engineers who got us into this mess and who are now getting even wealthier on the back of supposedly being the only people capable of getting us out of it.

    Equally tragic!

  • Comment number 62.

    40. At 11:34am on 5th Apr 2011, Lindsay_from_Hendon wrote:

    The best thing to do for Government finances would be to grant Scotland and Wales independence. You could keep your libraries open then.
    ================================================================================
    Yes, please! That would be lovely, thanks! And you could keep your wars going all by yourselves. Might not be much money left for libraries, though.

  • Comment number 63.

    I buy all my music on itunes now. I can listen to all the tracks for 30 secs before I buy, its downloaded in seconds and I can find new artisits and songs I would never find otherwise. HMV, it was only a matter of time. DVDs and terristrial TV are not far behind.

  • Comment number 64.

    #31 "I have never understood why economists think that 'growth' comprising increased consumer debt, increased imports, declining balance of payments, spending on unnecessary cheap consumer goods imported from China, increased exports of rubbish to China, increase in low paid boring retail jobs, unnecessary use of earth's resources in commodities, machinery, shipping etc, can be a good thing."

    Bang on. And you can also add to that the 'growth' from the public sector. This also gets lumped into GDP, as does banking growth, which all made it appear that the country was doing well under the last government. Now we can all see, if we open our eyes, that it was all an illusion. The only 'growth' that really matters is in the goods and services that we can produce and sell abroad.

  • Comment number 65.

    Did they ever stand a chance, who remembers HMV digital V iTunes, was like Woody Alan V Tyson (in his prime)

    Anyone remember getCloser.com? honestly when you do the math, is it any wonder HMV find themselves in financial ruin? the money they have wasted.....

  • Comment number 66.

    14. At 09:46am on 5th Apr 2011, ObserverinMonmouth wrote:

    Thanks for this - it all makes sense now. Can the BBC ensure that its so called experts discussing money before 7am know what they are talking about. It is abundantly clear that the £ has not depreciated by 70% - far from it. The oil price hike is almost entirely caused by profit taking and taxes - not currency depreciation. BBC please get your facts right.

    As to the economy in general I don't buy all the doom and gloom. This country was in a worse mess in 1945 and got through it although the 50's was not the best decade to live through but hey rock and roll started which made life bearable. In the 60's life was very rosy with great music and fantastic opportunities - I know I made decent money then. If history repeats itself we'll be out of the woods in 2 years or so and on the up again. Look at the stock market there is hardly any pessimism there - so why the negative comments? We'll get through this problem - just like we always have in the past.

  • Comment number 67.

    It just goes to show that the government is wrong to say that we are out of recession. HMV, Next, M&S. They are all facing uncertain futures due to the rate of inflation increasing as a result of rising oil prices amongst all other things. So, it's no surprise to me that HMV is struggling with profit, mainly because consumers haven't got the money to spend on such luxuries anymore, due to the rising unemployment and a small amount of advertisements on the jobs market.
    Also, I went into HMV a few months back, and they have a superb range of music, DVD boxsets etc to choose from. However, some of the prices for some of the products at HMV is ridiculous, and I usually go elsewhere to find the same product for a cheaper price. And this is probably another reason why the sales are down at HMV.
    Hopefully, HMV and all the retail shops that are under pressure will survive. But the reality is that it's not going to be easy, and hopefully we can get through this difficult period.

  • Comment number 68.

    #31 "I have never understood why economists think that 'growth' comprising increased consumer debt, increased imports, declining balance of payments, spending on unnecessary cheap consumer goods imported from China, increased exports of rubbish to China, increase in low paid boring retail jobs, unnecessary use of earth's resources in commodities, machinery, shipping etc, can be a good thing."

    It is only considered a good thing by those economists forged from within and in support of a Capitalist system.

    #46 "So what is the practical implementable alternative if the population is growing and people's expectations are for an improved standard of living?"

    What improved standard of living? This generation of school leavers are going to be less well off than their parents.

  • Comment number 69.

    18**

    Fair comment , but I still believe the HMV "brand" can still be successful on line . Waterstones would probably do better on its own -

  • Comment number 70.

    The good years in retail were none such as they were the years when anyone could buy cheap in China and sell dear in Blighty. Any idiot could succeed and many did. Now is the time the sheep, goats, men and boys separate out.

    The big retailers with their Head Offices in which everyone is a manager are just not behaving efficiently enough. In my view what is strangling retail is debt acquired in the boom years and attitudes to cost that came with the easy-come and easy-go attitudes of that boom. It was all so easy then to classify the cautious as negative. Now commercial survival has to replace office politics. Time for the Big Egos to go. There will be many successful executives looking for an new opportunity; usually called a job by us more humble fellows.

    There is a growing lack of demand in the economy. Our sales figures were none too bright this morning but it came as no surprise. It is the by-product of the cuts, it is the consequence of unemployment, it is the result of inflation, it is what happens when incomes do not rise. Three years into this crisis we could even call it a slump: perhaps we should call it a slump as this is clearly not a short, sharp recession.

    Cash will become king again! Liquidation sales here we come!

    The most worrying thing is that the OBR estimates of growth recovery appear to be rather dependant on private expenditure growing. There is little evidence to support that contention unless the consumer takes on more debt. Surely, in any downturn the individual pays off debt and saves more. So from where does the OBR draw its presumption?

    There have been bad times for many people these last three years, these are continuing and all the suggestions are that it will be a lot worse for a lot more people before this crisis bottoms out. Time to take in sail, batten down the hatches, point the vessel into the wind and keep off the rocks. Bit difficult, if your trading vessel is overloaded with debt, too many officers and not enough experienced sailors.

  • Comment number 71.

    @ 34 monmouth says time and inflation will help and JohnofHendon similarly suggests that inflation helps.

    What do you think will happen to our deficit and debt servicing costs when inflation jacks up the interest on our repayments?

    Where will that money come from?

    Sorry but the figures are eyewateringly painful, we cannot talk about them other than by saying we are waiting for a debt Tsunami of massive proportions to break on our shores and destroy everything that hasn't yet reached higher ground.

    The debt based model has got to stop.

    And yes we need public services, police, doctors, nurses, but these require tax revenues on real value activity.

    We cannot and must not operate a deficit between taxes raised and money spent ever again.

    As far as the harm to our economy is concerned John of Hendon, yes there is harm to the economy whatever we do next. The choice is which is the lesser harm.

    1. Default and rebuild based on real competitive innovative goods and services with an efficienct public and private infrastructure and investment friendly environment.

    2. Suffer decades of deflation or stagflation because our current model saps growth and any marginal growth is insipid and barely able to service our debt. In any case we simply cannot afford the constant growth in the deficit nor the massive risk of increased debt servicing as interest rates rise as they inevitably will.

    Sorry, but this is not "business as usual and we will weather the storm", this is one or two steps away from a complete disaster and we have to seize the opportunity to break the existing debt based model. We need a paradigm shift.

    So lets accept that harm is coming to our economy and if we don't anticipate it the scale of destruction will be much much greater.

    So forgive me John of Hendon but in my view, and I hope I am proved wrong, we cannot avoid harm. Loss of confidence is going to mean focus on the essential and reduced standards of living and spending, but if that means we have a future and if avoid the decades of misery that our current approach will cause then it is the lesser of two evils.

    Do we have the politics or political debate to support this? No. So what will happen next, well the Tsunami is coming whether we will it or not.

    The markets will keep on pursuing the PIIGS in the Eurozone all the way into core Eurozone France Austria Germany etc and in the process the UK will also be refused when it comes to borrow from the markets.

    Dont forget in 2009 the markets refused to by UK Govt debt and the loan was turned down by the market then. The UK Govt had to pay higher rates of interest to reflect the higher risk of default in 2009. This was a wake up call and the markets will get to the point of refusing to lend to the UK Govt again since our borrowing is out of control and our debt servicing costs will increase rapidly in a stagflating economy.

    What do you suggest we do then?

    The options will only be debt haircuts, or, default by any other name.

    Those who want to bolster confidence by avoiding these truths are only making matters worse.

  • Comment number 72.

    "To get out of this (catastrophic) 'money price trap' the Bank of England must raise interest rates substantially ASAP."

    This is so utterly wrong, I don't know where to start. The (very rapid) path to destruction down this route:

    1) BoE raises interest rates multiple times in quick succession.
    2) Homeowners + borrowers start defaulting in significant numbers.
    3) Banks respond by increasing the margin (gap) between interest paid on deposits and interest taken on loans, to protect themselves against defaults. This would be in the form of a further upwards impact on ALL lending in the country.
    4) 3 causes a partial feedback loop/hysteresis effect via 2.
    5) Dramatic increases in house foreclosures will force house prices down (a good thing).
    6) Consequent wealth effects drive consumer spending through the floor as people percieve themselves to be less wealthy and therefore spend less.
    7) This results in business defaults/bankruptcies, creating a further hysteresis/feedback loop to point 3, and to point 6 when people are made unemployed.
    8) Point 6 creates higher unemployment, resulting in greater benefits payments from government to citizens, and lower tax takes, further increasing the deficit.
    9) Government responds by accelerating cuts program to meet structural deficit reduction targets in time, causing further unemployment (see 6-9).

    Raising interest rates wil be needed in the end, but for the time being, it wouldn't even benefit the (frankly, horrifically self-interested) savers that comment on here.

  • Comment number 73.

    I used to work at both HMV and Virgin Megastores. I left in 2000 because I could see sales declining as the internet and supermarkets took more and more of the market.

    It will be sad to see them go but it may lead to a resurgance of independent shops that closed down due to HMV and Virgin.

    The problem HMV have is they are catering to a young market, who have been brought up on MP3's and swapped music in the playground while growing up and don't see it as piracy.

    With Virgin/Zavvi going you would think HMV's sales would have picked up dramatically being the last fish in the sea..except this sea has a leak.

    The music industry is churning out throw away music by throw away artists (some exceptions allowed) so why would anyone want to buy a CD. Add again the economic conditions and why pay for music if it can be obtained for free.

  • Comment number 74.

    On the topic of growth , I would prefer growth of just 2 % a year , against the 3 % growth of yester year that was built on increased debt (Both state and private).

    It's worth re-stating the point , that even AFTER the current cuts the government will still be spending approx £150 billion next year more than it receives in taxes and even after 4 YEARS of cuts the government will owe , well over £1000 billion . £20,000 for every man , woman and child. We should be setting out an agenda to pay back all the money within a 10 year period .

    Thus the talk of slowing down the cuts is simply pie in the sky ...

  • Comment number 75.

    Nautonier I think you may have got spivs on the brain (do not worry it is treatable on the NHS). So far in this blog you have called

    Developers - spivs
    importer - spivs
    banks - spivs
    landlords - spivs
    middle men - spivs

    oh and market traders are sometimes spivs as well but that is fine because they are nautonier approved spivs

    ==================================

    So looking back when did the rot start - 1990?, 1960? 1920? 1850?

    As Napolean reportedly said we are a nation of shopkeepers. Shopkeepers require stock and over the centuries we have had more and more varied and better quality stock. Many thinks are now relatively speaking a lot cheaper than 20 or 50 years ago. Is this all bad and run by spivs?

    You can claim that Tescos and Sainburys have ruined the market stall sector but the simple fact is that the big supermarkets deliver what the customer wants, at a quality the customer wants, at a price the customer wants. And if they did not the customer would go elsewhere.

    As for HMV the sad truth is that Amazon has killed its business model. By and large if people want a CD, they go to a web site, listen to some clips of the music and then buy and get delivered. If they want it immediately they download it. Music stores are a thing of the past.

  • Comment number 76.

    #24

    Change is coming, it is mathematically impossible to avoid the coming collapse and the actions of Governments in the UK, US & Europe only served to kick the can down the road for the last 3 years. Bring it on I say and let's get it over with.

    Banks are a service industry. They serve only to move money around and have gone from matching investors with businesses to skimming the profits from just moving money around and hedging the liabilities.

    Until things change we will remain in the ridiculous situation where the economy is now servicing the banks.

  • Comment number 77.


    Re: 29. - John_from_Hendon

    ---------------------------------------------------------------------------

    Sorry mate I don't understand? How does raising interest rates boost people's capacity to start spending again?

    It is true that some people are lucky enough to be able to use this period of low interest rate to reduce their debts, including some (like me) who bought houses in the years immediately preceding the crash and are now desperately trying to pay back our way out of a wholly catastrophic negative equity position.

    If and when we/they can do that then yes we might very well be in a position to return to the high street in some capacity but it's unlikely that house prices or wages are going to rise any time soon so this position is optimistic to say the least.

    However, many many others are only hanging on by the skin of their teeth, precisely because the current low interest rates are just about staving off mortgage default and eviction and, again, I don't see where raising interest rates is going to fix anything ineither the short or long term for these people.

    The only obvious beneficeries for raising interest rates will be (cue trumpets) the banks!!!!! Marvellous....

    No, the way I see it is that the system is broken, as it has been for years in Japan and is now right across the West. Credit is unavailable, debt is too high and unpayable for many - or for all of us if you factor in the sovereign debts, bond market, derivatives timebomb etc. There is no manufacturing base and no new buyers; just over-capacity, useless service jobs, stagnation, unavoidable imported energy & food inflation, currency deflation and the potential for total economic and societal collapse.

    Default, reboot and start all over again say I...!

  • Comment number 78.

    [[[68. At 13:03pm on 5th Apr 2011, lacoaster wrote: ]]]

    Lets not be rediculous most people in this country have a far higher standard of living than their parents and grandparents and that includes the millions of immigrants which this country has managed to support.

    So please answer the question posed to the poster of #46; "what is the practical implementable alternative to growth if the population is growing and people's expectations are for an improved standard of living?"

    NB this aspiration applies globally not just in the UK.

  • Comment number 79.

    This is the problem i have with alot of economic commentary. HMVs woes go far deeper than anything in the current economy. Using them as a barometer for the highstreet is stupid at best.

    You just have to walk into a shop and see why their bricks and mortar stores are in the proverbial, prices of Blu rays for example in HMV are a running joke on Technology forums. Who's going to pay a 100% markup to pick up a film on the highstreet, over HMVs own online offering which will arrive in 2-3 days.

    The fact is media stores, unlike clothes stores etc serve no purpose any more. Long gone are the days when you went to HMV to listen to the latest record release, which you could not hear anywhere else. Remeber in those days you would hear 1 or 2 singles on the radio, and would never have heard the album until you bought it or listened in store. Today you simple shoot up your free spotify account and listen to new albums. If you like it you click on your favorite online store and sit and wait for it to arrive physical or download), while continuing to listen to it for free.

    What amazes me more is they are still making "some" profit at all.

  • Comment number 80.

    @78

    You are ofc correct, living standard may fall for some in the next few years, but it will be hard for people to complain too much. Especially when they see (on their flat screen tv) impoverished people taking up arms and toyota trucks to fight for their families future.

    Is it about time we changed the way we gauge living standard. How many people would trade down from their 8-11 hour jobs + 2 hour commutes, for spending an hour in their own vegatable patch and working a few hours a day less.

  • Comment number 81.

    "24. At 10:25am on 5th Apr 2011, UK inc is bankrupt wrote: Quite a bit of doom laden myopia.... who was the Scots one from dad's army....private Frazer!!"
    The lenders were bad (and the borrowers by equal measure) but the Politicians who courted their support were the worst, as you say they should have paid down govt debt in the boom years but instead did a bit financial gerrymandering by increasing the size of the public sector (for no benefit that you can point to) to increase a group who naturally supported them, leaving ALL of us in real dire straits when a banking crisis erupted (when your GOVT PLAN B is to borrow in a crisis – pretty bad luck the crisis is "no-one wants to lend")

  • Comment number 82.

    @77 Russell wrote : "Default, reboot and start all over again say I...!"

    I am so sorry to say that this option may in fact be an increasingly likely least worst option.

  • Comment number 83.

    The retail sector is as flimsy as the banks. Plenty of City centre high streets are struggling for business at the moment but doesn't help when the likes of HMV have two stores within 5 mins walk of each other. Stores doubling up is not needed and this is rife in places like Cardiff, Bath and Gloucester. Means fake jobs created that have to go! There is cheaper stuff on the internet so thats one reason but people aren't saving money though! Restaurant/pubs whos prices have gone up heavily since the recession are booming, people are willing to queue to get into a Harvester! And since when was Weatherspoons food cheap anymore? over priced rubbish! but people are paying it. People order a £16 pizza from Dominos yet could get one half the price with extras! or three for that price at a local takeaway but.. no can't do that can we? they taste the same its fast food!!!!!! People are spending elsewhere and paying more but not on the High Street and not saving for a rainy day, the culture will never change. Most people have a car these days before a job now how can that be right? Plenty of students have an iphone these days on a £45pm contract yet no job! Everybody calling these things esstential and blaming government when they can't get it, people need to grow up this country is a MESS! If we want to stop the jobless total going up for the next generation i suggest people stop chucking out babies that they and the economy cannot support, we can't all have a job there have to be losers in the world we all can't win!!!!!!!

  • Comment number 84.

    78. At 13:32pm on 5th Apr 2011, ObserverinMonmouth wrote:

    > So please answer the question posed to the poster of #46; "what is
    > the practical implementable alternative to growth if the population is
    > growing and people's expectations are for an improved standard of living?"

    You have inadvertently stumbled upon the most important question facing humanity. We all realise that we must imminently decide what is the most practical alternative to growth, then implement it. Everyone has ideas – what are your ideas?

  • Comment number 85.

    Your last paragraph says it all.

    It shows how the credit crunch was precipitated by Central Bank interest rate hikes - in Japan in the late 80s and more recently by Greenspan in America and then King in England, so bringing about the current malaise

  • Comment number 86.

    Oh goody, goody, the high street will have a terrible time.
    Why not, when all they sell is imported stuff that is thrown away after hardly any life at all,
    And hardly any happiness created?

    Oh indeedy do, go to visit your local "Civic Amenity Site" and witness still
    the endless amount of nearly new stuff that has been THROWN AWAY.

    Oh recycle, recycle, recycle until your virtue beams out of pores,
    While the masses still are shopping and dumping,
    shopping and throwing away,
    shopping and wasting,
    and this is the ECONOMIC SYSTEM
    whose design we are supposed to be impressed with?

    Thank you, oh small-brained economists with big salaries, for your part in this terrible national debacle. Go to your local tip and see your GDP. Your local tip is easier to find than your local forest.

  • Comment number 87.

    Robert,
    just FOUR weeks ago HMV issued a profits warning and consensus was for approx £39m, now we are down to £30m!!! ...in four weeks!

    due to lack of shoppers this time, so even worse.

    HMV is history, finished over.
    The banks are just keeping it going a little longer to see if they can sell off the bits in Canada and Waterstones.

  • Comment number 88.

    "54. At 12:27pm on 5th Apr 2011, RedHairedGirl wrote:
    Robert,
    Things are much worse than your figures suggest. £1.5tn of household debt equating to 150% of disposable is based entirely on current interest rates!

    Be warned. When interest rates do start rising. Many households will simply fall of a cliff."

    correct, at which point the banks will have to be bailed out again. This is the can they have been trying to kick down the road since mid 2007.

    ECB will up rates by .25% this month, watch the pressure mount on sterling.


  • Comment number 89.

    87. At 13:57pm on 5th Apr 2011, avulcan wrote:
    HMV is history, finished over.
    The banks are just keeping it going a little longer to see if they can sell off...

    -------------------------------------------------------------

    The banks have also lent money to the commercial landlords.

    I suspect that there lies the real problem. Secured lending on property that cannot generate the rents needed to pay off commercial mortgages. Commercial property that can only be re-let on rentals that using the traditional multipliers have a value in the realms of negative equity.

    The lenders will do all possible to avoid defaults on property. Far more important than defaults of a retailer.

  • Comment number 90.

    78. At 13:32pm on 5th Apr 2011, ObserverinMonmouth wrote:
    [[[68. At 13:03pm on 5th Apr 2011, lacoaster wrote: ]]]

    So please answer the question posed to the poster of #46; "what is the practical implementable alternative to growth if the population is growing aLets not be rediculous most people in this country have a far higher standard of living than their parents and grandparents and that includes the millions of immigrants which this country has managed to support.nd people's expectations are for an improved standard of living?"

    NB this aspiration applies globally not just in the UK.
    --------------------------------------------------------------------------------------------------------------------------------------
    I will give you an extremely simple answer- people's expectations will have to change. We are now reaching the point where the exponential growth model fails, due to all of us being confined to a finite planet with finite resources. That is not economics, but simple mathematics, although many economists (even some Nobel laureates) seem to have trouble grasping this straightforward mathematical proposition. Which of course begs several questions regarding the credentials of economics as a discipline.

    The only solutions are either a massive decline in world population, or an economic system which ensures a more equitable division of available resources. Failure to achieve the second, will inevitably lead to the first, by extremely unpleasant processes (war and starvation).

  • Comment number 91.

    jeez this is pitiful... sheer arithmetic says we are being drawn into a blackhole.
    Excess debt + an uncompetitive economy = bad news for years to come.
    People..just get use to it.Its your new normal. The Banks kiled us with cheap credit + we bailed out their excessive risks when they failed.
    New start..let banks fail..pay off depositors( Joe Public).Start new banks with new money ... make Joe Public shareholders.
    Seperate retail/casini banking.Absolutely no link to be allowed between them.
    Any bankers who want to emigate ..let em ? Go China( I am sure the CCP would welcome a bunch of useless parasites ).Go to USA ( they will wise up soon and kill off Wall St banks ).
    Lets start capitalism again..only this time on a level playing field.If any company fails(inc.Banks)..let it fail.New ones will come thru.

  • Comment number 92.

    robert,
    when will people understand there is no capitalism, as this would imply that there is capital " money or value" in the ecomany.
    this is not the case everyone, from the shops to the consumer is in dept...

    the sooner we accept that and the dept is too big to pay then we are all bankrupt.
    the country is bankrupt, and so are the households by and large of this country.

    so the way forward, tell people you can`t pay. that the banakers and the investors and start again, generate wealth from within. and become a trading and manufacuring nation.
    as a consumer nation its over, why make people live in the misery.

    finally. if someone is stupid enought to lend you more than you can afford to pay back that is there stupid fault. would you lend someone money they could not pay back????

  • Comment number 93.

    24

    Should we be angry with the banks? No the deficit is because Gordon Brown forgot that markets are cyclical and spent more than he raised in tax even in the good years.

    We now employ 1 million more people in the public sector than we did when Labour came to power in 1997 and the country can't afford it.

    The bank bailout has cost the govt. nil, the bank shares and loans to banks will be classed as assets on the govt balance sheet and would only affect the deficit if they were realised for a loss (which is very unlikely).

    Meanwhile the govt. has profited by taking the shares of Northern Rock & B & B without paying compensation to former shareholders, charging penalty rates of interest for loans provided and additional direct taxation on the banks. At Alastair Darling's last budget he said that the bank had benefitted by £8 billion a year for the support that they gave to the banks.

    The blaming the banks is just a smokescreen to hide Labours economic incompetence.

  • Comment number 94.

    60. At 12:45pm on 5th Apr 2011, kingkoodles wrote: ..
    the Supermarkets who are now making HMV look very very silly on all fronts.
    -----------------------------------------------------------------------------

    Seems to me the supermarkets are downsizing on sound and vision stuff. Anyone with a brain is watching tech progress with one eye on their spending plans.

    All my music is now obtained on line and soon my DVD collection will be redundant as well.

    Every time this happens a lot of jobs go: not just shop jobs but delivery jobs, warehouse jobs, factory jobs and admin jobs and that's just the obvious ones.

  • Comment number 95.

    75. At 13:20pm on 5th Apr 2011, Justin150 wrote:

    Nautonier I think you may have got spivs on the brain (do not worry it is treatable on the NHS). So far in this blog you have called

    Developers - spivs
    importer - spivs
    banks - spivs
    landlords - spivs
    middle men - spivs

    oh and market traders are sometimes spivs as well but that is fine because they are nautonier approved spivs
    .....................
    A) The spivs are all within various vested interests over-funded on credit by our rotten banking system ... ever heard of the credit crunch? Oh yes, the listed spivs are also generally, socially useless other than for routine/basic provisioning.

    Some market traders are 'spivs' (in the old/traditional sense of the word) but just earning a basic living ... some of the vested interest spivs are part of powerful pressure groups, using the establishment, historic and corrupt rights and privileges to create super profits for themselves, on a large scale, at the unreasonable expense of those who are not fortunate ... but probably more words wasted as many accept the social injustice they are 'Allright Jack' ... but that segement of the population ... their own security is now at issue as things are still very shaky.
    ................
    So looking back when did the rot start - 1990?, 1960? 1920? 1850?
    ................
    A) Who cares? The question is when is Mr Cameron and his big society going to make changes?
    ................
    As Napolean reportedly said we are a nation of shopkeepers.
    ................
    A) We used to be ... now we're a nation of debtors!
    ................
    Shopkeepers require stock and over the centuries we have had more and more varied and better quality stock. Many thinks are now relatively speaking a lot cheaper than 20 or 50 years ago. Is this all bad and run by spivs?
    ..................
    A) Most of this stuff is imported at huge mark-up to the import spivs and this puts and keep British workers on the dole with nothing to make, assemble or grow
    .................
    You can claim that Tescos and Sainburys have ruined the market stall sector but the simple fact is that the big supermarkets deliver what the customer wants, at a quality the customer wants, at a price the customer wants. And if they did not the customer would go elsewhere.
    ..................
    A) The main supermarkets have created their own market and put most other shopkeepers and stallholders out of business. The supermarket prices are carefully rigged to be generally similar and if you think that customers dictate prices in supermarkets ...then you must be seriously deluded. The only other place the customer can generally go is to another supermarket... as there is a highly privileged cartel in operation ... buying in cheap foreign goods and selling at huge mark-up to the British consumer.
    ....................
    As for HMV the sad truth is that Amazon has killed its business model. By and large if people want a CD, they go to a web site, listen to some clips of the music and then buy and get delivered. If they want it immediately they download it.
    ...................
    A) Yes and we're all much poorer for the experience! How utterly and totally boring is buying CD's and listening to music over a desktop PC
    .......................
    Music stores are a thing of the past.
    ........................
    A) Really? ... Only because they are not run and managed properly ... they use to be a the place to be and just need re-organising and re-branding ... some imagination and fresh ideas

    We'll now see who is right ... incomes are under pressure ... the credit bubble has burst and modern big retailing is too expensive as our credits cards will not now hold up the high cost base of big modern retailing ... Britain needs low cost alternatives and more low cost competition... the big bank fulled 'spiv-fest' is under pressure and scrutiny ... that is exactly why the internet sales are increasing ... modern big retailing has got too big and expensive and often is just for selling off 'old stock', particularly on white-goods/electrical.
    Finally, using larger than proportionate borrowed capital to make super profits on the expense of the majority of society is I think parasitical and a social evil (just to be clear about what I'm saying)

    We just have different values ... (BTW I won't ask you where you fit in all of this) ... as I think this is a matter of economic efficiency, moral values, education and genuine empathy in the interests of social justice.

  • Comment number 96.

    @ 46. At 11:43am on 5th Apr 2011, ObserverinMonmouth wrote:

    > So what is the practical implementable alternative if the population
    > is growing and people's expectations are for an improved standard
    > of living?

    Well, let's have a look at this. Let's say that growth turns out to be not practical or not implementable? It sure looks like that's the case. That makes an alternative much easier to find, doesn't it?

    As growth isn't practical or implementable, then the search is on for anything else that is! Anyone for communism?!?

  • Comment number 97.

    92. At 14:22pm on 5th Apr 2011, mackemade wrote:
    when will people understand there is no capitalism, as this would imply that there is capital " money or value".....everyone, from the shops to the consumer is in debt...
    -------------------------------------------------

    Good point, from now on we should all refer to our current system as debtism.

  • Comment number 98.

    Robert,

    Having perused your blog for some while now I have to say that, when it comes to matters concerning the general state of the economy things, more often than not, arrive at the banks and/or the monetary policy of the monetary policy committee.

    To take a small diversion to arrive at my point, let me refer to three contributors to this blog who, in their own idiosyncratic ways, shed some realistic light on the key issues.

    First there is 'Red Haired Girl' who gives the impression that she is always moving from one landlord to another whilst paying a rent, a high rent, that is scarcely sufficient, indeed is most likely insufficient, for the landlord to cover his, or her, mortgage payments.

    As an aside, I should say that I'm not entirely sure 'Red Haired Girl' - so much more imaginative than BJK - is for real. No disrespect to waitresses, but she sounds far too intelligent to be waiting tables. She could almost be a character from a novel...or song, for that matter :-

    "chng chng chng chng chng chnng -It's just another day - chng chng chng chng chng chnng...It's just another daaaay"

    Whatever, 'Red Haired Girl' has wonderfully illustrated the problem highlighted by 'John-from-Hendon'-over inflated asset/property prices. The days of peppercorn rents from landlords who own their properties outright have all but disappeared with the burgeoning rise of a buy-to-let landlord class, to whom the banks have been somewhat overwilling to lend, with the resultant channeling of bank credit money into property.

    Thus, as John-from-Hendon is always at pains to observe, we have massively overpriced property values. He is also critical of the actions of the monetary policy committee in keeping interest rates at an historic low for an extended period of time because this has resulted in a meaningless price for money itself.

    And so on to 'Dempster', whose pithy postings always contain very useful nuggets of information and observation. Of relevance here is his suggestion that fiat money issued by the government follows credit money issued by banks.

    Now your colleague, Stephanie Flanders, has written much in recent times about the monetary policy of quantitative easing being pursued at present. So, leaving aside the question as to which comes first fiat money or credit money- in the light of the key problems raised by 'Red Haired Girl' and John-from-Hendon's', isn't it worth asking, first, who should issue new money and, second, how can the issuing of new money - fiat or credit - be squared with the need to adjust asset prices down without damaging the lives of individuals and the economy as a whole?

    Well, on the first question, life being so dull an' all, I was flicking through David Ricardo's 'The Principles of Political Economy and Taxation' - which, I must say is the economic equivalent of 'Finnegan's Wake' - and came across this:

    "...if there were perfect security that the power of issuing paper money would not be abused, it would be of no importance with respect to the riches of the country collectively by whom it was issued"

    He then goes on to point out that, for individuals, because the government pays no interest on the money it issues - fiat money - whilst individuals would have to pay, through taxes, the interest due to banks if the governemnt borrowed money for issue from them. Thus:

    "...the public would have a direct interest that the issuers should be the state, and not a company of merchants or bankers."

    Fine. However, he goes on to say that whilst:

    " A company would, it is said, be more under the control of law, and although it might be their interest to extend their issues beyond the bounds of discretion, they would be limited and checked by the power which individuals would have of calling for bullion or specie...the same check would not be long respected if government had the priviledge of issuing money; that they would be too apt to consider present convenience rather than future security..."

    Wise words, indeed. Our recent experience suggests, though, that banks will quite readily lend 'beyond the bounds of discretion' where property is concerned and that government spending can get out of control at both the same time and, when those bounds of discretion collapse, find itself issuing large amounts of fiat money too keep the banking system intact, too.

    As for question two, well, that's the tricky one. It would seem proper, though, that whoever issues new money - be it fiat money or credit money - it needs to go into things of value, to individuals and the nation in its entirety, other than property; into things that yield more in the future than just a rise in the nominal value of existing bricks and mortar.

  • Comment number 99.

    [[[84. At 13:52pm on 5th Apr 2011, Jacques Cartier wrote:]]]

    You may think it a stumble but it's been fairly obvious to me for a long time and I suspect the same will be true for many other people. However since I asked the question first in response to #46 I will await their or if you like your considered answer.

  • Comment number 100.

    OK so we let the value of property - private and commercial- decline, so's it becomes realistic again.

    Well, the money isn't there, is it? I mean that if only a few are being sold then mortgages could be created to justify the supposed "value" but really we should grasp this nettle and free ourselves from this nightmare. The UK property portfolio is worth far, far less than its on paper value. Devalue property and the economy is liberated.

    To lead us there how about imposing maximum rents? Didn't we used to have those, anyway, with rent tribunals etc? The same could be put together for commercial property, if too late to help HMV(!). So if rents are kept low then demand for property declines and prices plummet.

    Maintain low rents and save the economy and the people in it!

 

Page 1 of 2

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.