M&S: no ordinary downturn
Is Marks & Spencer the true story on the high street or a bit worse?
The story it tells is certainly pretty dire.
The famous like-for-like sales, which show sales per square foot in older stores, are truly horrible - with general merchandise 8.9% lower in the 13 weeks to December 27.
However, it's probably the trend to unadjusted, overall sales that's more disturbing.
For the group as a whole, these were 1.2% lower, thanks to a particularly strong performance outside the UK and on the internet.
But here's the ghastly bit: overall UK sales were down 3.4%, including the benefit of Marks' well-publicised and unprecedented promotional days.
Clothing was the worst performer, with sales 6.5% lower. Food was just 1.1% down - which represents a modest recovery.
Also, the profit margin of Britain's largest clothing retailer was significantly lower, because Marks has been forced to slash prices.
Sir Stuart Rose, Marks's chairman, expects the bad times to last at least a year.
So he's closing 27 less profitable stores, shedding 1,230 jobs and making the pension scheme less generous. He's also taking a knife to investment, with capital spending falling from £700m this year to no more than £400m next year.
This is pretty savage stuff, designed to keep the group profitable during the worst high street downturn for almost 30 years.
Marks' profits this year are expected to slump around 45% to a bit over £600m.
So the days of laurels and awards for Marks' well-known executive chairman probably feel to him like a lovely distant memory.
Update 0839: It's rare that Simon Wolfson, the chief executive of Next, makes public utterances. And perhaps today we know why, because he certainly stirred things up a bit this morning in his Today interview, when he criticised the government's emergency cut in VAT.
This reduction for a year in the VAT rate, from 17.5% to 15%, will cost £12bn. It's supposed to help groups like Next, Britain's second biggest fashion chain, by encouraging all of us to spend a bit more.
But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending.
A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy. He's very worried about the consequential ballooning of public-sector debt - and he believes that, like Next, Gordon Brown could do more to make the public sector more efficient.
Quite rightly, he was at pains to point out that the difficulties on the high street are a recession, but not Armageddon - and that groups like his and like M&S remain solidly profitable.
In which context it's as well to point out that Marks has managed expectations among its investors of what to expect from its results in a characteristically astute way.
Although its trading update was hardly uplifting stuff, its shares have risen a smidgeon this morning.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~41~RS~)
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What's annoying is they didn't learn freom the last time they got into this kind of a hole: they cut quality. Now, why should I buy expensive cords which are supposedly lycra when they tear across the male bits as soon as I squat down, wthin two minutes of putting them on, if I can buy better at Peacocks?
Rose sorted this out then, pity he's been dragged into the same track now.
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Again you havent in my opinion really answered the "So What ?" question.
M&S are selling fewer clothes this year than last year. I suspect most of us probably have enough clothes to keep us warm and presentable, so during a time of financial uncertainity a number of us are cutting back a little on discretionary spends.
Indeed an economic model which has us all consuming ever greater amounts of goods and services is in a resource limited world clearly not sustainable so one could argue that a rollback is only somewhat sane.
or am I missing something here ?
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thats right none of the companies or corporations ever helped any body except underpay them. we've got real serious problems of our own in our so called real life.
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I would expect the situation at Marks to be a fair reflection of what's happening on the high street.
I see Marks as a mature organisation that has recently transformed itself to be competitve again. They have a good line of new quality products (The 2 person Dine For 10 Pounds deal is excellent I think) and are not afraid to take tough business decisions to do what is needed.
They are no longer the clunking dinosaur they were a few years ago.
Their actions sound like a sensible post-xmas move and they have now battened down the hatches to make the best of 2009.
So basically, I think they look as well-positioned as could be expected!
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The short reporting periods demanded by the stock exchange make it very difficult to build up a big picture.
If a company makes £10 profit last year, and £3 loss this year, it is still £7 to the good (to put it is super simple terms).
if they kept this profit, or invested it wisely, would we be talking about recession, or just "a bad couple of years"?
I was always taught to "save for a rainy day". not to declare myself bankrupt because I spent it all while the sun shone...
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Robert you told only half the story!
Number of stock lines? down?
Company debt? How much?
Bonus payment to managers?
How many staff was taken on for xmas?
Re-source of materials?
Distribution costa?
Wage freeze?
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Good stuff, less landfill then.
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# 2
Indeed...economic growth from 2007 levels will never be seen again. Growth of any sort will only show up if we slump and get used to a much lower standard of living (in consumption terms anyway, maybe we'll all be happier).
Let's hope it gets bad enough for us to question the whole model we live by and come up with something a bit more rewarding than buying more rubbish than we did last year.
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I sincerely hope that the senior execurtves running our largest, banks, businesses and retail enterprises will now start to inject a new sense of realism into their future business plans on how to survive the next two to three years. When inflation figures and interest rates look like they will be at an all time low then this should be reflected in lower profits and margins expectations.
When drawing up their bussiness plans senior managers need to adopt a more pragmatic approach on ways to survive the downturn and less on the bussiness school model that shows the easiest way to maximise profits and margins is to maximise selling prices. Maximising selling prices was a simple easy option when times were good and there was plenty of cheap money in circulation but times have changed (possibly forever) and that option is no longer as readily available as it once was.
In cases where cheif executives see the need to cut back on labour costs, by say 5 or 10 percent, then they should seriously consider taking a similar cut in their saleries and other remunerations to relect the challenging circumstances confronting the business. The days when only the work force are required to make finacial sacrifices are hopefully coming to an end.
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As per normal from this man, overaction.
I have been reading about the downfall of M&S for a decade now.
First from the likes of Gap etc.
Now Peacock etc.
Need I say anymore!!
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I think the Simply Food stores especially on motorways were really good value.I will miss them but as for other M&S merchandise,the food is overpriced without a just reason,their mens clothes range is tat(Asda George range for men is excellent value) the rest you can get at Argos or online much cheaper.As usual the saddest point is those who will become unemployed,that is the tragedy.
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Phil Green must be kissing all those people who rejected his bid....
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What a roller coaster you ride Robert
M and S down 8.9% is "truly horrible".
Only yesterday, you called Next's 7% slip "not as bad as it could have been".
Confused, moi?
What a shoddy business M and S must be, just scraping a £600M+ profit. Oh dear oh dear, how badly run it must be.
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Sorry for multiple posts, keeps telling me there was an HTML error every time I posted.
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All of this doom and gloom at M&S, making severe cuts suggests that they are in financial difficulties.
However their balance sheet shows huge profits for the previous year and I would guess that they are still in profit this year.
So why is it necessary to be so savage with cuts now? Are they losing money? Or is it simply a way of boosting their profits to shareholders at the expense of the employees?
Are they going to cut a similar proportion of board members and senior management team too? I think not....................
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As we all know, this is just the beginning of a very difficult year for the UK and US economies.
On top of that, the rest of the world doesn't look too great either, as UK and US consumers cut back spending on German and Japanese manufactured goods. The M&S story shows us that consumers are even reducing their expenditure on the cheaper goods imported from China and India.....
Which means the Chinese and Indians will have to cut back on their spending.
Then the oil producing nations such as Russia and the Middle East are all suffering due to the low price of crude oil.
So, it's cut backs all round, and in the UK we have a falling currency, and a government that doesn't have the ready cash to bail-out all the businesses it's promised money to. The UK government thinks it can borrow as much as it likes, but just who is going to lend all this money to our government?
Never mind, if we ignore it, the problem will go away, won't it?
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I think Stuart Rose has performed quite admirably here. Although M&S does have good quality food, it's bread and butter is primarily it's Clothing business.
Closing 25 food stores is surely just good business.
The main argument may be why did they waste money opening in the first place, but all businesses have to innovate, and occasionally realise they were wrong. Unfortunate for staff etc, but no job is guaranteed, never has been, never will.
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I think Marks went a long way to securing its future when it started stocking brand names, such as Marmite and Coca Cola - Before this it was a shop where people bought there "upscale" groceries, but still had to do a weekly shop.
It is now more of a "one stop shop" (although pricing itself out of the market on many goods) which will have helped it retain profits.
Also, I agree that its Two Dine For 10 pounds deal is excellent, as was its 3 party food and a bottle of cava deal for the New Year!
It is competitive enough to survive and we shouldnt worry - Its not another Woolworths!
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There are elements of the service side which are simply not Marks and Spencer ... well, not as we knew it.
I have a current problem with the quality of milk ... Marks are the only retailer left that sells milk made with 4% fat content. It meets my taste need and I buy other premium foods and wine from the store as a result of buying the milk. But of late I have found the milk is only sold in a 4 pint container and sometimes not available at all.
I drew this inconsistency to the attention of a floor manager, having been unable to persuade anyone in the department that 4% fat milk 'does exist' and eventually proved my point. The floor manager got in touch with the dairy produce buying team and was told a reply from them would follow.
That was November 17th and no reply has since come through.
So now, as I cannot be sure of buying what I want, I use cream instead and buy at Tesco's - which saves me a 5 mile round trip and costs M&S around £40 per week in lost sales.
Says it all, doesn't it?
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M&S does not turn me on
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Can anybody tell me what the 70000 M&S staff actually do?
Whenever I visit the Chester store there is never anyone to talk to or get advice from and many of the clothes racks are in a mess.
This has always been the case so it is not surprising that sales are down.
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We have too many shops in UK, its better to close some and reduce waste. The big cost to retailers are rent and rates, if stores are closed rent could fall due to over supply also government could do some thing to cut rates.
We cannot continue to sell each other we have to increase our manufacturing base; it would be useful if government cuts tax to manufactures as if manufacturing increases there will be more jobs; these jobs will pay tax and benefits will fall. Over all the country will be better.
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Closing "less profitable" stores. So they are stores that are NOT making a loss then! People are being made unemployed because they are not making enough fat profits which go to whom I wonder!
Whatever happened to companies being in the black being a good thing? Nowadays they have to make obscene profits to be seen as being successful. This is the business model these days especially with private equity. Private equity also has that sneaky ability to offload the cost of purchase of companies as a "debt" incurred by the purchased company which has to be repaid within 5 years and can thus be offset against tax........I wish I could do the same with a house and get the people currently occupying it to pay off the mortgage I borrow!! Brilliant!!
I also note this obsession with measuring performance with 2007 (including house prices). Simply look at charts going back earlier than 2007 and you see that that year can be classified as "mental" peaking in October. So my prediction is that the year-on-year perfromance metrics will start to swing positive as we compare data with a 12 month old post peak curve.
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I like how all comments are moderated, except Peston's ones. So a 3.4% drop in sales during an economic downturn (fuelled in no small part by the media's scaremongering) is 'ghastly' is it? I'd have called it 'expected' or 'not actually that bad, perhaps things are not as bad as the media is making out'.
Someone moderate Mr Peston before he does any more damage please.
And Robert, remember that at some point if you keep fuelling speculation and doom and gloom, the Beeb may start cutting jobs too....
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In a time of falling wages and squeezed consumers, retail is not the place to be.
It looks like we will all be shopping in out of town hyper/supermarkets in future.
They will be the only shops able to cope with long term depression.
Time to visit the Garden centre to buys seeds !
Plan that vegetable garden, home grown fresh vegetables later in the year are a good return on a small investment.
And fruit trees. They are good in the long run.
How are the Housebuilders doing ?
I keep asking but nobody bites.
It is a pity that many new homes are built with small or non existant gardens.
Never mind, we live in an economy run by Gentlemen or Graduates who do not understand the businesses they run. Too bad.
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This seems to fall into the "So what?" category. When Chrysler car sales fall 53% that's news, or the Madoff scandal and the regulator that didn't bark in the night --- that's news. Or when tanks are shelling UN schools in the Gaza strip, that's news. But Marks & Spencer only making GBP400m profit instead of GBP600m? Robert, please get some perspective and don't magnify noise into news.
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The problem with M and S is that they are now neither fish nor fowl. They have never managed to become a desireable 'label' to wear, so don't try to compete on that level - if you have a reputation for producing top quality 'day to day' wear like they used to stick with it; the quality of the goods is no longer as it once was, take 'pants' (well after all, it's what they are best known for!). You buy your new pack of 'pants' only to find they are of a far poorer quality than the last pack you bought 12 months ago - it's hardly going to inspire you to try one of their 'Autograph' shirts or other more expensive items of attire.
As for everything else they sell - they can't compete with a supermarket as you can't get your entire weekly shop there. The range of stuff they sell for the home is just so 'hit and miss' you will probably go elswhere to be assured of getting what you want.
They have truly lost their way - again!
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Oh Dear Mr Peston. Here you go again doing everything you can to spread alarm and despondency.
It is just another tough trading cycle and everybody in the retail sector is going to suffer but we have seen it before and we will see it again. It is just a matter of degree.
I am afraid your analysis of observations and prognostications are beginning to become repetitive and foreseeable. It is going to be tough - we all know that but as a former retailer we adapted and retailers will adapt now. Shops will close and others will see an opportunity to open or even expand.
The FTSE is rising on expectations in general and I notice the US Reserves rose last month. Come on - cheer up and stop being a boring Jonah!
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Good Morning Robert
Once again I am interested to read your interpretation of the M&S figures this morning. I think Stuart Rose and his team have done an excellent job in producing very admirable figures in these very difficult times. Furthermore the measures proposed for the future are make basic commercial sense. At least Stuart Rose tells it how it is.
I would much prefer his approach to that of the CEO of Barclay's Bank whom you managed to extract a grudging, lukewarm apology for the current crisis in your Panorama Programme. Maybe if you focused a bit more on the 'brutal' way High Street Banks are treating SME's at the moment you might find out why people are reluctant to go out and spend in the High St.
The Times Editorial yesterday stated that the British Public feel this situation is unfair as it is profligate lending by Banks and Public Spending by Governmant that has contributed to this situation. The feeling that we the public are bailing these institutions out is very apparent.
One last thing I am intrigued by correspondence in the Times from the senior Partner of Price Warterhouse Coopers and an FCA as to the conduct of the Big accountancy firms in this crisis. It is worth futher consideration in my view.
I praise you for your investigative journalism, but if you could tone down the negative hyperbole in situations which I consider relative successes it would be appreciated by myself and many others. I believe other institutions I have mentioned above deserve far greater scrutiny than they are accorded now by you.
Regards
Guy Bewick
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Perhaps Mondays post was a bit too quick off the mark?
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It is beyond time that the retail analysts see through this failure of a man, he is just another one of those Burton Buddies that think they are some form of retail guru's.
Get rid of him now and save us the embarassment of having to listen to his pathetic comments about how he is trying to help the consumer.
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Here's a link to today's cartoon in the Times especially for all the doom merchants on "Preston's Picks" .
http://www.timesonline.co.uk/multimedia/archive/00461/cartoon-385_461459a.jpg
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Dear Preston
"Always look on the bright side of life!"
Sales being made through the internet rather than stores is just progress.
a 1.2% reduction in sales is not ghastly.
lets have some balance to cheer us up!
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"But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending."
The only person who did not realise it was a mistake was Gordon Brown!
http://news.spotz.com/groups/gordon_brown_must_go/default.aspx
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Was there any need to drag politics into this?
Wolfson criticised the Government's ludicrous VAT discount - so you promptly bring in the fact that he is a Conservative supporter.
Well I expect you now to comment on the political affiliations of every businessman whenever they make a comment - no matter what subject.
e.g. Lord Sainsbury - A Labour supporter said ....
If not you are showing the innate BBC ad hominem, anti conservatorem bias.
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#26
I quite agree!! Sometimes i think this recession will go on for as long as Mr Peston continues his scaremongering.
He has suddenly turned into a Z list celeb! Destined for Celeb Big brother next year??
I dont see anything of importance in M&S results, other than they are still making a lot of money and are going to silm down so they keep making lots of money.
Wolfson comments are also of no importance. Yes we get it Wolfson your a Tory and your repeating words that we have all heard a million times. The thing is the Goverment needed to to some thing and quick and i didnt see anyone else at the time come up with a brilliant idea.
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I think greed is the problem here,when the money is coming in they are happy but like most big corporations as soon as the going gets tough they cut staff to the bone,
Anyone in their right mind knew this was coming, but not even the goverment bothered to prepare for it, i dont even think we are close to the bottom yet and it will get a lot worse before it gets better
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Can someone lend me a Hobby-Horse?
There seems to be a glut of them!
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I agree with Wolfson on the cut in VAT. It will make little impact on the high street. It would have been cheaper and far better for increasing employment to have abolished VAT on 'Building Repairs' for 18 months. That would encourage home owners to do repairs that would need to do sometime anyway. New houses don't attact VAT.
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Is it not possible to send Mr Peston on a long holiday? We can then get on with our lives without his daily comment on the latest doom prediction waiting to blight our lives!
Come on BBC you are a public broadcaster try a little balance in you editorial!
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#38
I agree with you however the BBC god bless them has a different opinion as outlined in this reponse to a complaint I made about Pestons previous stock market effecting over the top gloom laden melodramas.
"Robert Peston's tone is always measured and balanced and we've received a
huge amount of praise for his reporting - a recent survey has shown him as
the most trusted public face of the global economy above all politicians
including the Chancellor and the Prime Minister. It is true that we will
try to use colourful and descriptive language to illustrate the story and
accurately capture what have been dramatic and fast-moving developments.
Our audiences are larger and more appreciative of our reporting than at any
time in recent history.
We certainly do appreciate the stress caused by the financial situation and
the real consequences on the lives of individuals, but do not agree that
our reporting of it adds to that stress or hardship. On the contrary, we
believe that fair and accurate reporting of the financial crisis helps
people to understand the origins of the situation and the current
circumstances and most of our audience is highly appreciative of that."
I trust this explains the BBC's viewpoint on this topic and thanks once
again for taking the time to let us know your strong views."
So perhaps not Celebrity Big Brother but Peston for PM, at least the BBC seem to think so !
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There is no point in anyone trying to be positive when the media insist on talking things down.
I've listened to Robert Peston over the last few days acting as Dr Doom.
On the Today programme this morning Jim Naughtie we tring to put the worst gloss on news.
Only Simon Wolfson of Next took a positive view.
So lets be straight forward about the high street.
Woolworths and MFI have been basket cases for years. Adams expanded too quickly as have some of the other retailers who are in difficulty.
If Tesco or Marks and Spencer looked like going bust I might be worried, but they are making huge profits.
As a small business consultant my main gripe with clients is that they have not marketed in good times prefering to let the boom years do their marketing. They are now scrambing around trying to find new customers when the customers have worries of their own. Had they invested in marketing they would now have a larger client base to act as a buffer.
While the credit crunch is to some extent to blame, it is the weaker "head in the sand" businesses with poor business plans and no contingency plans for a downturn in difficulty.
So in summary, things are not catastrophic and we will emerge from the downturn. The strong players will be much stronger with a greater share of the pie which will grow in future years.
At a time where the birth of Darwin is being celebrated I can only think that "survival of the fittest" is very apt.
So Robert Peston and the rest of the media, don't be so negative, be forward thinking, and look forward to 2010/11 . It will make the situation seem a whole lot better than when you are negative all of the time.
You are in a privileged position of being on high salaries in safe jobs where you can say what you want with no come-back.
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sorry, just checking - seem to have some trouble posting on this blog.
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Its a good thing I didn't read your blog yesterday, else I might have thought that the loss of a thousand jobs "shouldn't be seen as a savage and massive redundancy programme. M and S is the largest fashion retailer in the UK and employs more than 70,000. These job reductions represent less than 2% of the workforce".
Now, however, I learn that the loss of 1,200 jobs is "pretty savage stuff".
I must question whether Rose reads your blog/ the general BBC coverage - doesn't he know that the end of the world is actually upon us?
As an M&S shareholder I am shocked that Rose may oversee a PROFIT REDUCTION TO ONLY £600 MILLION. What business does he have making any profit at all?
Do please keep using words and phrases like "slumped", "slash prices" and "taking a knife to investment". They certainly add to the perception that M and S management are taking sensible, prudent steps to preserve the business.
PS love your comment about Wolfson being a conservative supporter. Full marks for balance on that one.
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"A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy........."
Mr Peston, what is more important to you? That he is a respected leader of commerce or a well known conservative supporter?
Are you suggesting he is kicking the Government where it hurts because he is a Tory or he is a leader worried about his business?
I previuosly ignored blogs about your labour background, but now i am not so sure.
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Marks & Spencers have yet again fallen foul to the same assumptions that left them in a mess in the 90's.
I bought a pairs of work shoes last summer that fell to pieces in just 4 months. It is clear that they cut down on quality to boost profits.
In the new year sales i saw they had suits at 50% off at £80. Normally i would have them made on holiday in Thailand (£60 for a beautiful suit from the best fabric, or at least when Sterling was strong). I did not buy one because the fabric was terribly thin and cheap looking. Hugo boss are selling amazing suits at just over £200 and for £130 you can get a decent respectable suit. Marks and Spencers had better stop taking its customers for fools and attempting to sell tat while claiming to be mid market in quality.
Shoppers know what value for money is.
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#27 supercalmdown
Ah, a swipe at graduates - that's me!
Of course fresh graduates will initially know less about the "grass roots" of a business than someone who has been slogging it out in a customer-facing role since they were 18.
The point is that we are supposed to have developed the transferable and technical skills to be able to absorb such information quickly to make up this lost ground.
In theory at least, a well structured graduate scheme should enable a good graduate to quickly plug the basic gaps in their business experience (e.g. through diverse graduate placements and rotations and the core business areas).
A BADLY structured graduate scheme is a real lose/lose for all involved.
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Over the years M&S have taught their customers not to buy anything before Xmas because like most other high street stores, they will cut the price in January. They and other shops have ripped off the customer for years, now, they will have to pay the price. They and others are still trying to outsmart the customer rather than give the customer a fair, honest service. They deserve all the problems they get.
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I wish those 'do-wells' who post about 'doom-mongering' would stop and consider more fully what's happening. Some are saying 'shops and businesses will close but others (we) will do OK' etc etc. Kind of like 'there'll be winners and losers'. Well, of COURSE that's aways true! That's evolution. Statistically true and obvious and doesn't need repeating.
See, the underlying thing this time, as in the 90s is that a huge amount of money/capital/investment, call it what you like - has gone out of the UK so there is a lot less to go around. I don't see it coming back. Add to that the decreased spending power of the pound abroad at the very time exports are so weak - due to its being so high - for so long! You can't turn that around in five minutes. My firm has been heavily export-based for 7 years, I know this.
So although there will always be canny folk who prosper the long term looks pretty bleak on the whole and the only thing that will turn it around is money coming back into the UK. I expect the Govt to see its fiscal revenues dropping in due course as a consequence in the rise in unemployment and fall in personal and coporate tax revenues. Never mind those who just cannot pay because they're run out of money. This seems inevitable, does it not? The effect of dependence on UK (internal) money just going round and round on this island will be that the pot gets smaller and smaller as Govt spend the tax. There will still be winners and losers but fewer of them. Meanwhile the quality of life (such as it ever was for many) will get worse and more frightening.
I see no initiatives coming from any party that will encourage regrowth of the economy with 'non-internal' money. The socio-economic consquences of this spiral, well, they're obvious to me at least. All this guff about the UK being able to exist as a service based unit, barmy, completely barmy.
As for those who cry 'it's caused by greed' - who's job is it to run the country and manage the economics thereof? Yours? Mine? No, it's the Government's job. If the Govt runs an economic 'tight ship' you can be as greedy as you want but it won't get you anywhere! They have the power, they have the means and the authority (should they choose to exercise it, which they rarely do except on meaningless petty legislation that no-one respects, far less wants). Lock, stock and barrel. No use anyone saying otherwise, just plays into the fools' hands..
I hope these articles by RP and our comments (in general) do make someone take notice, my goodness, I really do.
GC
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50
On my previous point, does anyone think it would be useful/be made compulsory that commentators like Robert Peston, who are by the way opinion formers, should be made to declare their personal political stance before making their comments.
This would not only lead to more balanced and less biased reporting, but also let us the "donkeys" know where we stand
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these results are far from ghastly - the problem I feel Bert is you have never ran a business and therefore you are snipping at the edges
8% drop in turnover would be a result in my book given what has been going on in the recent past
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Not surprised by these figures. M&S clothes are quite poor now - you can but trousers there for £10 for goodness' sake - and the food is now standard rather than premium - expectations have caught up. Looks a bit like losing clear visoion of their place in the market. SAying that, of course, they are a long way from being a basket case, yet.
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A fair amount of the time like for like sales in retail will be slightly negative due to canabalisation from new / refurbished competitor stores or the internet in recent years. You have to be a top performing retailer (i.e. Tesco etc) to always have positive like for like after stripping out inflation (i.e in real terms).
I would say the Marks numbers are good given we are in a recession (anyone care to look at the numbers during the early 1990s one?), marks are more honest about what is included in like for like and things will improve as other retailers disappear or slim down in the coming months.
The number of items sold went up, they are still profitable just not as profitable as last year, they have less debt than many competitors and no Icelandic links.
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"A well-known Conservative supporter, Wolfson also raised serious concerns about the government's central economic policy, of spending more and cutting taxes to combat the contraction in our economy."
Just getting the Brown/Mandy justification for the criticism out early then, Robert?
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I fail to see relevance or balance in the remark that Simon Wolfson is "a well-known Conservative supporter" - does that make his opinions on the economy less valid?
The fact is that his remarks on the VAT cut were absolutely right - this is a pointless waste of taxpayers' money at a time when retailers are slashing prices anyway. He was equally right in saying that an income tax cut would have been more effective.
I would like, just once, to read Robert pointing out the futility and waste of the VAT cut at a time when retail prices are tumbling anyway.
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More companies with financial problems... Robert will be having a little tug over this one. BBC, when are you going to realise that this type of vulture reporting is not becoming of you. Robert's poor reports contain incorrect and insufficient facts and seemingly glorifies in yet another company in financial dire straits. It is biased and sensationalist and belongs in the Red Tops not on a BBC site.
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I have a subcontract engineering company and I wish my sales were down 3.4%. They are currently down over 30% and we are fighting like mad to increase sales. I employ 40 people and their future is a worry to me. If someone could offer me a break even position in 12 months, I would snatch his hand off. On top of this we are losing money with customers going out of business. Only yesterday, one of our longstanding customers went and left us with a £10,000 deficit. The government should stop messing about with stupidities like the VAT reduction and do something for manufacturing. Surely, now that the financial sector has shown itself to be worthless, manufacturing has to be the future.
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In times like this Robert your lack of worldly experience is showing.
The key to a company's and this country's success will be the amount of debt it is running on and off balance sheet not the pre tax profits as peopel seem to think.
Expectations of continuing boom conditions were too high so now the muppets who saw stratospheric growth are doubling up with doom and gloom.
We need more transparency of government funding with Labour accepting teh National Audit Offices findings and companys not being allowed any more off balance sheet liabilities.
Once we can see the extent of the damage it will not quite be a piece of cake to get it sorted but the full extent of the problem will then be attacked and sorted far quicker.
Our biggest worries here are still the Banks and large Insurers, by definition they would naturally have the most diverse portfolios so all efforts must be made there to get the truth out in the open without it the problems will drag on far longer than they need.
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I refer to "angelbusman's" comment earlier who said "What do M & S staff do?".
You really are ignorant to the amount of work involved in retail. My wife leaves the house every morning at 5-15 to work an 8 hour shift, 5 days a week and is exhausted by the weekend. She, like I, have to work these hours to make ends meet and I can assure you she puts in a full days work interrupted only by customers asking for advice. With the cloud of redundancies now hanging over all staff I would appreciate it if you kept your negative comments to yourself.
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If Marks and Sparks close stores it is going to hit small town High Streets pretty hard.
Many smaller local shops rely on customers visiting small towns because shoppers have the 'big name' shops to visit. If there is no longer Woolies or M&S on your local High Street why bother going there? Go into your nearest big town/City.
The closure of these stores is going to have a knock on effect for smaller shops and may change the face of some small town High Streets forever, and may even be the end of some small town High Streets, which will not encourage people to move to that area!
This is something that no one seems to have picked up on as of yet.
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52. Guy Croft
Good post.
Those people who think Robert Peston is partly causing the recession are very naive, to say the least.
The media does influence ecvents, but the severe economic events we are currently experiencing are much bigger than the media.
We are facing very serious economic problems, and consumers cannot spend the UK economy out of trouble even if they tried.
The next few years will be very hard, whether we like it or not.
All we can do now is attempt to mitigate the problem. The ship has hit the iceberg and is heavily taking on water. Life boats are being lowered, but do we have enough lifeboats and are they well enough provisioned? Where will the rescue ship appear from, to pick up the survivors?
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If Marks and Sparks close stores it is going to hit small town High Streets pretty hard.
Many smaller local shops rely on customers visiting small towns because shoppers have the 'big name' shops to visit. If there is no longer Woolies or Marks on your local High Street why bother going there? Go into your nearest big town/City.
The closure of these stores is going to have a knock on effect for smaller shops and may change the face of some small town High Streets forever, and may even be the end of some small town High Streets, which will not encourage people to move to that area!
This is something that no one seems to have picked up on as of yet.
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What a depressing article
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Dear Robert
"SO WHAT" -, are cutting jobs, and closing stores, BUt what about the greatest Failure in Britain the Stock Exchange, ITS lost Billions of Pounds, yet no one hankers over that.
This Down Turn will be the worse this country has evr experianced and M&S WILL NOT BE THE ONLY STORE TO FAIL IN THE EYES OF THE STOCKMARKET, who create the insecure trading oportunities due to expectation,
Lets just be thankful that they are still trading, unlike Woolies, who were Failed by the Banks and the Stockmarket, as unworkable,
The Banks Failed woolies, and they will fail many more Companies who they think are unsafe, due to Credit ratings.
Dont forget, The banks themselfs FAILED BIG TIME yet no one goes after the Banks as having failed, and they are being propped up with tax payers money, ---"so they are still Failed."
High Fianance and A STOCK MARKET that creates Uncertainty are the cause of Company woes, they make or Break a compamy in the name of Great Briatin PLC, because they are not performing properly. Above all that, the MAIN STAY of the British Economy are the SMALL BUSINESSES, who before this Debacle created by the Banks were more than holding their own, now due to the Banks, and the stockmarket uncertainties that are driving Britain PLC into the ground, more jobs will be lost.
THE MAIN PROBLEM WITH BRITAIN TODAY IT DOES NOT HAVE A MANUFACTURING BASE, THAT COUNTS ANY MORE, THE MAJOR SKILLS OF TRAIN MAKING , SHIP BUILDING, AIRCRAFT ETC ARE ALL BUT GONE , THATS WHERE WE HAVE FAILED, and failed in a big way,
So at the end of the day
"WHERE HAS ALL THE MONEY GONE"?
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27 supercalmdown
I answered your similar post re veg growing on yesterdays thread as follows
"Time to consider the layout and design of a vegetable garden.
Just a little work and a few seeds and you can have free veg later in the year"
I am sorrry to say that you're wrong. It is an awful lot of work, especially to begin with, and only truly sustainable if your main focus is on improving your soil, not getting instant results. There is a good reason that retirees have the best veg plots and gardens, its partly the accumulated wisdom gained from experience but mostly due to the 6 hours a day they can potter profitably around in them!
Also, IMHO out of town hyper/supermarkets are NOT the future; centrally-located outlets selling locally-sourced goods are.
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So it is tough out there on the High Street, the least fit are going to the wall and the sounder businesses are trimming their sails and battening down the hatches for the coming storm.
The High Street to my mind is a bell-weather for the rest of the economy. It tells us about consumer confidence, how much money there is about and popular expectations. The suggestion is that these are changing.
However, there is still money about and consumption continues. For many the recession so far has just been an inconvenience. This is the good news.
The bad news is that the prevailing situation is only going to get worse. The government has taken the view that the more money it sloshes around this trend will be minimised making the recession shorter and shallower.
This argument is missing the parallel with the USA. Christmas 2007 seemed very good for the US retailer: lots of sales, lots of discounting and so on. Sound familiar?
One year on the USA is down deeper than last year. Next year we will most likely in the same shoes as the US is now.
I know our government is hoping that Patrick O'Bama (hurrah for the Corrigan Brothers) will open the box to spend the money from 20 January and save the day as the US dollar charges to our rescue.
I think not. Credit levels are in the graveyard and their resurrection is a long way off. So beware New Labour vampires.
My suggestion is trim the sails, batten down the hatches, point the bow into the wind and beware the lee shore. Sorry about the nautical terminology but I am a natural landlubber.
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Hi
Before you were famous for being a) right and b) ahead of the government. The comments section was, by and large, a sensible place for discusion. Now however the nutters have arrived in large numbers and it is nowhere as interesting as it was. I 'll still read you blog because it is good, thoughtful and reasoned but I'll skip the comments section
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I think Robert you have hit the nail on the head, it is internet sales that are propping up the high street, no expensive shopfront overheads and lower cost to serve will be the way forward for most companies.
Woolworths failed to compete and with the exception of Pick and Mix online sellers such as Play and Amazon offered everything they did at a fraction of the cost form the comfort of the armchair.
Next Online is profitable but is dragged down by their high street profile.
You can buy designer quality clothing online for a cheaper price and now customers are becoming internet savvy, they shop around for online bargains.
I am afraid this is evolution, adapt or die.
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We need a manufacturing base!
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What a truly terrible piece of journalism. Why not report the truth rather than sensationalism? In a recession how fair is it to report that like on like sales that show a single percentage drop from a bumper boom year is a "pretty dire", "truly disturbing" or other such ruthless words? Surely it shows a managed reduction in trade, that is over and above expectations for such a poor marketing period in a financial situation that was unprecedented?
One only has to see how Mr Peston's reports affect share prices to judge just what this does to the countries economy - and having had two weeks of very little news of interest it seems shares were increasing likewise. Only now are M&S in a "disturbing" way even though Next weren't yet they were in a similar situation?
Very odd indeed.
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#64 Mr Tweedy
As a chief naive, I do, of course, disagree with you.
However, even I don't blame Peston for the downturn/ slump/ recession/ crisis, but do hold the BBC to account for spinning and sensationalising the news and emphasizing the bad.
All I ask is for balanced, un emotive reporting. Tad dull, perhaps, but simple and straightforward will do nicely.
Thank you for accepting that "the media does influence events". The news is bad, true, but the Beeb's manner of delivery is adding to the overall sense of misery. And that IS affecting the economy.
That is not the role of the BBC.
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Too much headline grabbing here - shock horror sales down 7% in a recession - well jings criven help ma bobbie!!
Big business is driven by share value - all exec renumeration is based upon it - large scale institutions want increasing year-on-year share values. This is associated to above inflation dividend payouts.
However to the vast majority of people surety of employment is the predominant need. Govt initiatives to ease cash-flow requirements within smaller businesses is the key to ride out recessions - small business is where it's at when it comes to the real economy.
Focusing on large scale business - some of whom go to the wall irrespective of the economic conditions is a false way to look at the economy.
The world is not doom and gloom - not armageddon - it's a downturn, it will hurt but nowhere near as much as mid-eighties, mid-thirties etc.
Robert, you need to get some perspective - it's a boom-and-bust cycle - it's called capitalism - no escaping it - it's driven by people's greed and fear cycle.
In other words - in our world this is normal not abnormal - it we start treating it as such we will all cope much better.
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Why the repeated references to the fact that the head of Next is a conservative supporter? You are trying to undermine his criticism of the government by suggesting that he is politically motivated.
You should give his remarks more credit since he runs one of the largest and most successful retailers in the country.
Instead of referring to him in the headlines as 'the well known conservative supporter...' you could equally say 'the highly respected retailer...'
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Why do people think Mr peston is only giving bad news. It is bad news.
This talk of 1% down off a bumper high as a good result is a little hopeful.
The recession only kicked in in October/November for many retailers, but M+S was hit a little earlier.
So the news isn't too bad and we shouldn't worry? We are 6 days into the new year.
Woolworths was not in a uniquely bad place that makes it the only vulnerable retailer.
M+S are taking the first steps, much as Mr Peston has indicated. The underlying message is that there will be
[Unsuitable/Broken URL removed by Moderator]
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Still expecting a PROFIT of around £600 million.
What would happen if they made a LOSS?
Businesses needs to get a grip of reality here.
It is impossible to keep expecting higher profits year on year.
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The retailers have had a decade of near year-on-year growth and were foolish enough to think that nothing could stop this trend. Pick your metaphor for M&S (and others): Cutting your cloth....Emperor's new clothes....Rose is a master of spin, but has yet to prove his mettle as anything but a "business as usual" CEO.
Tone
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@64 Mr Tweedy,
I must be naive then, one of the big problems in coming out of recession is restoring consumer confidence, if the likes of Robert Peston keep banging on about how bad it is then that only serves to further undermine consumer confidence making the recession longer.
Nobody is saying that Peston is responsible for the original economic failings but his constant nay saying about pretty much every attempt to get us out of it coupled with his apparently limitless capacity to find the cloud in the silver lining is running the risk of crippling consumer confidence for a longer term.
Whatever happens I'm sure Mr Peston's BBC salary is cushioning him quite nicely from the effects of the downturn.
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Someone must be making money, the stores that are rented are earning someone a lot of money, as they are not cheap, maybe that is something that can be looked at , as well as house prices being too high, I think commercial rent is too high.
Of course this has nothing to do with you being able to have commercial property as a pension,
that will be another bubble to burst , but at least that is a long term punt.
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Oh dear, yet again the usual suspects accusing Pesto of causing the downturn.
It really is a load of oblate spheroids. If you look at the history of the last few hundred years, ( and I have, extensively,) you should understand that Bubble and bust are a regular feature of capitalism. The longer the bubble is inflated, the worse the ensuing bust. Every time it happens, those who question the sustainability of the boom are vilified. This often causes those who do understand keeping quiet to avoid taking the blame for the collapse.
The problem with the financial system (not the free market in general) is that its structure facilitates regular insane orgies of speculation. These then inflate asset values to a point where their paper worth is far beyond the ability of the real economy to accommodate. The result is always a disastrous collapse, but those who get out early, or sell short, are vastly enriched. (This is an observation and not a moral condemnation.)
Anyone who does not believe this is probably part of the problem. Please get yourselves better informed. Galbraith's "A short history of financial euphoria" is a good place to start.
Then come back and apologise!
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@76
It's called context, if he was praising the governments policies to the heavens and was a Labour donor would you be happy with him only being described as "a successful retailer"?
Thought not.
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Ohh, come on people. Robert is telling like it is. If you want spin, sunshine and upbeat pep talks go and talk to Mandelson. Just keep telling it like it is Robert and those of us able to think through the issues and come to our own conclusions will do the rest.
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#24
These comments are spot on:
"We cannot continue to sell each other we have to increase our manufacturing base; it would be useful if government cuts tax to manufactures as if manufacturing increases there will be more jobs; these jobs will pay tax and benefits will fall. Over all the country will be better. "
Service industries and retail are all well and good in a thriving economy but when the going gets tough they are the first to suffer. The bottom line is as a country we have to start being clever again and stop being so intellectually redundant in trying to make a living, because where we are going is not for the faint hearted.
The easy days have gone.
We cannot sit around and cut each other’s hair because that won’t cut it! (Pardon the pun)
At the moment if it can be made on a machine then it can be made on a machine cheaper in the Far East. We have to design the machine.
People need to get away from the 'they just copy it and produce it cheaper in the Far East mentality' While a lot of companies have made the mistake of selling their 'Crown Jewels' which is essentially their intellectual property rights that is not where it ends. Having a technical product which can be repetitively turned out is one thing, understanding it is another.
This is where the West wins out. Because you are the designer you are effectively one step ahead and you are already adding 'whistles and bells' to your initial product which effectively starts to make your initial copied product out of date. The competition is always in catch up.
From personal experience a huge Japanese Corporation with immense resources though it would just copy what my company (80 people) makes. It fell on its face big time. It now buys this product from us. Problem solving for people in the Far East is a small piece at a time. I would suggest they are not very good at it.
In the West and particularly in the UK we have a 'quirky' approach to R@D which looks at the big picture and take the big steps. It may end up in smoke in which case the information and data to improve comes from the smoke. It can often end up with big technical advances. We have a culture of risk which comes from technical confidence. We laugh at the smoke and get on with the job. By contrast a honour based society like Japan has real problems with the smoke because their culture is to hide things and mask results to not lose face.
We make some excellent and clever products in the UK and my own company is proof of that. Our real problem in the past was selling and developing them in the wider world but even on that front we are catching up rapidly.
Encourage your kids to take those hard Science/Engineering based careers that hurt your head but will pay the bills in a future Britain.
'Wishy washy' has gone and intellectual rigour is where it is at. Look back at our past because it is in the gene pool it is some thing we have always be good at, it just seems a lot of people have forgotten!
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Another lesson of history is that confidence cannot be recreated by "talking up" the economy. It does eventually return, but only when there is no more bad news left. We are nowhere near that point yet.
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Unless you advise the political party of everybody you quote (or religion etc), so we know where they are coming from, you have in my mind, I am afraid, lost much of your credibility. Perhaps we should now have a clear statement of your political views.
Mr Wolfson was only expressing a view, as a business man, that seems to have been expressed almost unanimously by businessmen of all parties. My straw poll over the Christmas period of everybody we met did not find a single supporter for the VAT move compared with alternatives for the same cost.
And just so you know I have voted both Consertave and Labour
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#82 and 84
I feel I should apologise now.
Obviously, I didn't make it clear enough - no one blames Pesto for the downturn and, no, I don't wan't upbeat cheery Mandy-esque news.
I do want plain, unbiased, unemotive news coverage.
Is that sufficiently clear?
Or, in any way, wrong??
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Is it just me, or isn't anyone else blown away by the fact that (effectively) the whole population of UK visited M&S over the 10 days before Xmas?!
OK, so it didn't help their numbers etc, etc, but that is just astonishing!
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"But Wolfson said that the expensive VAT reduction was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending."
or they could have refunded everyone's television licence. Hey Presto instant 'Xmas' cash to spend.
They could then waive next years fee.
J.S.
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M&S still showing profits. Who believes that? Every few years there are scandals, Enron, Worldcom, Madoff who would believe these auditors? Work with your own money. Invest in yourself and your business. Do not be greedy. Just today another scandal "India IT boss quits over scandal".
http://news.bbc.co.uk/1/hi/business/7815031.stm
How can we tell every company in the world is not doing it? Even though the company is in India the same international auditors are auditing them. It has happened before so many times in other more developed economies like US.
Throughout 1000's of years of human history in every religion Christianity, Islam, Hinduism, Buddhish, all have told us the same thing -- live within your means, only spend what you have, never look to generate more wealth out of your wealth, do not gamble with your wealth.
There is no reason why a person/company will generate money for anybody else. I do not understand this business of making money out of money. Why would anybody make money for anybody else? Those who say that are liars and thieves.
There is no reason why a person/company getting 1% of mutual fund money will generate money for anybody else. People who believe that investing a mutual fund and/or publicly floated shares or any financial product is going to make them money are living in a fantasy land propagated by the likes of "LUCKY MAN" called Warren Buffet.
Similar to madoff scandal what is stopping companies to show the money raised from bond markets as profits? All accounts are cooked according to the recipe required by the senior management throughout the world.
It is a "vice" to look for "return on your money" but it is a "virtue" to look for "return of your money".
Do what Robert Peston does do not invest in any shares!
Learn Learn Learn
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We are indeed now into 'Darwinian' economics-the fittest being those companies unreliant on lines of credit. Trimming of wastage should have happened months ago, and theoretically, a well run business shouldn't have waste.
However, there will be a rocky period now, even for the 'fittest' companies, as their customers will number several 'unfit' companies.
Credit insurance agencies will now be under pressure for payouts, and will also have already changed their credit criteria to reduce their exposure.
Equally large businesses take upwards of 100 days to settle their accounts, and in some cases apply a discount to their debt (Boots) for example.
I have one European customer who has now started taking 5.5 GBP off their invoice in lieu of their bank charges!
So attending to your own housekeeping will not be enough. Widening customer bases will help, but GB needs to stop large companies putting SME's under pressure like this.
Reducing income tax, corporation tax and national insurance contributions for SME's immediately would be very appropriate and would keep the life blood of this country going.
Frankly, plc companies should be run responsibly - if not, they deserve a spanking.
They're having to do what most SME's have already done. As it's on such a massive scale it makes the news!
Robert being SME's into the spotlight a lot more-maybe more support will be forthcoming!
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75 and others - there seems to have been a surge in bloggers blaming media comment, mainly the BBC and especially Bob "Pessimist" Peston, for all our economic woes. This is all part of a normal recession, their argument goes, it was boom, but now its turn to bust. Those green shoots of recovery (i.e. the next boom) are being trampled by Robert's gloomy words.
Guys, get real. As numerous others have already posted, there were specific historic circumstances (wars, technological leaps, under-developed resources and countries still to exploit/pillage) that helped us (i.e. the UK economy) recover from previous economic slumps, but that don't appear to be available to help us (this time round, meaning the World economy) this time round. Its hardly surprising that so many of us "doom and gloom "merchants are plying our trade!
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Ghastly, disturbing, unprecedented, worst performer etc etc. Quite a language you use to sensationalise the expected news. As a financial journalist did you have no idea what the figures were going to be like? Or this kind of reporting for the benefit of layman who probably are still not aware about the tough financial condition facing the economy? Overall UK sales are down 3.4%, considering we are facing a severe downturn which is affecting more or less all sectors and very tough trading conditions this is hardly a surprise but unsurprisingly its again very poor and patronising news reporting.
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52 Guycroft
I agree with you, if it makes you feel any better.
I post on here in the vain hope that somebody who is in a position to do something may read what I write, and give my comments some thought.
Maybe just maybe they may think that I have a point, which has not previously been considered and think that some sort of action may be required.
I must admit that I write more in hope than expectation but it does get things off my chest and acts as therapy.
But just to get a few things off my chest, Please everybody and Robert included consider this.
The government is just like any business or individual in that it must balance to a great extent the money that it receives (ie taxes) against the money it pays out.
It is acknowledged that in August 2007 the government was borrowing money to fund expenditure at close to historical limits.
This was in spite of massive tax revenues from fictitious bank profits and taxes which had been paid to the exchequer on all the money individuals had borrowed.
In Roberts article THE NEW CAPITALISM he states that the treasury has lost forever perhaps 30 to 40 billion in tax revenues due to the city of london shrinking.
I dread to think how much tax is being lost as a result of individuals not being able to borrow 40 billion ( a conservative estimate)each year.
When 40 billion was borrowed I would guess (but would love someone to correct me) that the Government would have received more than 40 billion in taxes. These figures are per year by the way, not aggegated.
My reasoning for this is that if the money is spent in a shop that initially there would be 17.5% tax on it. This money would then have gone to pay staff wages on which PAYE (30% tax on it) would have been paid. Corporation tax (30% ) will also have been paid on the profits. These wages would then have been used by the staff to go and buy things on which VAT would have been paid etc etc.
I could go on and on and on about reducing tax revenues but people would stop reading.
The point I am trying to make is that in 2007 that the country as a result of government overspending was nearly living beyond its means.
Now that the money coming in is falling off a cliff and no attempt is being made to cut spending, we are definitely living beyond our means.
Don't forget also on the spending side
Unemployment benefit is increasing rapidly.
Public sector pensions are currently outrageously unfair.
We have a national health service which everybody wants to be free, yet every year costs more and more because there is always more and more that it can do.
Continually burgeoning workshy
Up above is just a taster but the main point can be summed up thus.
IF THE COUNTRY HAD TO BORROW IN ORDER TO PAY FOR PUBLIC SPENDING WHEN ITS MAIN SOURCE OF INCOME WAS FUNNY MONEY FROM THE BANKS HOW ON EARTH IS IT GOING TO BE ABLE TO AFFORD IT NOW?
We need more than just green shoots if there are any.
The future really worries me
All of those people who blog on here and criticise the doom mongers just try and answer in your own minds the above question.
Where on earth is our future income going to come from.
Every day goes by our costs increase and our income falls.
At the moment we need to earn a fortune just stop the difference between costs and revenues getting any bigger
This bit is now off my chest. Yes I am a doom monger but can somebody tell me a way out of this that doesn't involve putting my head in the sand and everything will be alright.
Tell me how that works exactly
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Robert Peston - unfocused and immoderate (and unmoderated) in your comments again. As a PR briefing the media, I would never get away with such sensationalisation of the figures ...'a pretty dire story, truly horrible sales, ghastly news, pretty savage stuff' (reduced expenditure), etc.
Given the context, the figures are nothing like as bad as this - get out among UK business people and do some objective reporting instead of riding on the crest of your own recessionary wave.
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Seperately
Peston did not cause the downturn.
The down turn was caused by people not being able to continue to borrow 40 billion each year against their houses to spend on things that were not needed.
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#52 Guy Croft -
Another excellent post from you. I particularly agree with the following statements
(1) I see no initiatives coming from any party that will encourage regrowth of the economy with 'non-internal' money.
I think this is THE biggest problem facing us and the USA too. Ok, they may have a charismatic leader about to step on to the stage, which is more than what we have (or are likely to have, whoever wins the next election) but I just don't see anyone coming up with any radical solutions.
(2) The socio-economic consquences of this spiral, well, they're obvious to me at least.
This is what I keep thinking. Surely if tax revenues decrease, through inevitable rising unemployment, the unemployment benefit liability will increase. With this in mind, how can the government's vision of spending our way out of this mess actually work? There will fewer people with spare cash and those who are 'lucky' enough to have anything spare will be even more cautious with it than they are now. It really is a vicious spiral that could, in theory, lead to social unrest on a scale far bigger than the inner-city riots of the 80's.
(3) All this guff about the UK being able to exist as a service based unit, barmy, completely barmy
I've worked in the service industry for the past 13 years and I can see the downturn being far more than just a temporary blip for our industry and also for the other service industries that we supply to. This, again, has a spiralling effect. We have recently had to cut 10% of our workforce, even though we have a strong balance sheet with good cash reserves. We're about as streamlined on the workforce front as we can be but if we lose just a few more clients then I fear we will just HAVE TO make more staff cut backs. People talk about the housing bubble but I really do feel we have had a service industry bubble too. It was good for many, financially, while it lasted but it really has got a slow puncture now...and nobody seems to have a repair kit for it
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This comment was removed because the moderators found it broke the House Rules.
Robert it seems lots of the bloggers don't need any more info on the recession, they seem unconcerned with you single figure percentage drops in retail and the odd 100’s in redundancy.
It’s the old story, when times are good it’s down to entrepreneurs and sound business leaders – and when it’s bad it’s scaremongering!
Let’s all pretend it’s fine and sod those who lose their jobs – in short let’s shoot the messenger – and while we are at it have a word with the chaps in the Middle East Dept about their reporting of the issues in Gaza, their reporting must be stirring up some of the trouble! Tell them to find some good news...... surely the bloke that sells bullets is having a good year!
Guys the difference between VERY good times and VERY bad times can be as little as +2 and -2 percent.
It really was never going to a 50 percent drop and 20 million redundancies – but that doesn’t mean it isn’t grim out there!
Buck up!
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How will this affect M&S's plan to become "carbon neutral" in five years - announced a year or so ago?
So, how's that plan going so far?
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@ 88 edgarbug
> I do want plain, unbiased, unemotive news coverage.
You can't have it I'm afraid. Everybody brings baggage to what they publish, but, you can analyse the people or persons who are giving you news and work out why they might be saying it that way.
If the author of a blog post was working for the de facto state broadcaster, you might be cautious about believing absolutely everything which repeated access to excellent news sources gives you. After all, it might be reporting a very particular, or partial, analysis on the issue of interest to you.
In these circumstances, you would do well to read widely and balance differing opinions against the particularly well-informed source.
It's not going to change anything about the way individual news organisations report (and nor should it), but it might help you feel happier.
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really, down 3.4% is "ghastly"?! surely any well run organisation would expect - and be able to manage - deviation of significantly greater magnitude than 3.4%. i have long suspected that RP is actually just a bit of a berk. and his recent blogs have confirmed this.
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MS is overpriced and staff seem to do nothing but talk to each other. Too few tills operating.
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There must be some mistake in the way these people prepare accounts.......they should have seen a lot smaller drop than this with the 12 billion vat giveaway....
Or are you saying the vat bodge hasnt worked i look forward to you exposing the governments complete failure to act responsibly.
Could you also tell us small investors where we can earn the best interest rates on our money as now keeping it in a bank is pointless.
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This comment was removed because the moderators found it broke the House Rules.
re 86
totally agree, my comments are not to attack or blame peston.
If i did not believe in his sincereity i would not read his blog.
The purpose on commenting is to give my own view, which is that above expected performances by m&S, next, debenhams have been reported with a very pessemistic stance.
Frankly, to me this is an ordinary downturn which is the comment i like to make
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there are problems with your system it keeps saying html problem
no html
sort it ouit
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Like MrTweedy #17 I have been wondering who is going to lend all the money to the Government (that is on the the assumption that they don't simply print it).
Could it be those same institutions who were previously lending to the banks on "mortgage back securities"?
Maybe not the internationals, "sovereign wealth funds" etc; but perhaps UK finanical institutions who see Government bonds as a safer haven when house prices are falling.
If so, what are the implications for the sought after recovery in lending to, and lending on by, the banks?
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Of course Marks can weather the storm. Their goods have always been overpriced and quality deteriorating. You can be sure that the company has had its share of profit and bonus taking in the past and Mr Rose has been handsomely rewarded in the halcyion days. His statement is preparing the way for worse to come and he is really issuing a veiled profit warning to the shareholders. Cunning indeed. As for the VAT debate the cut is a complete waste of money. The government wants us to spend our way out of recession but how can we with other pressing overheads like increasing energy prices, increasing rail fares, food and necessities. All the encouragement to spend on things we would like to have is just not going to happen. Reintroduction of MIRAS relief and a reduction in stamp duty would be much more effective and more visible to the general public.
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Why is there some god given right for sales to go every year. So sales are down 3.4%. Over the last 10 years we have seen spending that was never goingto be sustainable. This isn't so much a crash as a return to normal, sensible spending patterns. The fact is there are way to many shops in this country, way tomany shopping centres. Seems now every large town needs to have is mall with is huge 'anchor' store. It's rubbish. We need less shops, maybe all these empty properties can be converted into housing that we apparently so badly need. Oh... sorry hang on we got loads of that as well.
The entire House/Debt boom was and is based on a lie. That you don't need to save becuase house price will make up teh slack. Truth is over tiem house prices, adjsuted for inflation have stayed pretty constant in price. The lie is exposed and we are jsut getting back to business again.
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Having gone to trouble of registering I had asimilar problem with my initial pearl of wisdom to that of mrsbloggs13c2, so you're all - including RP - none the wiser!
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Like everyone else, I went into M&S before Christmas, in my case in the vain hope that I could buy classic, basic work clothes.
What they do stock these days is party/casual clothes, their new formal range is a disaster consisting exclusively of trendy trouser suits with cropped jackets (fine if you're under 25).
I haven't bought anything in there for quite a while now and if clothing is their basic line then they need to rethink.
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Overall group sales down 1.2%! Have you taken leave of your senses. Considering that this is the worst global financial crisis on record this performance is phenomenal. If you factor in that a large proportion of Mark's products are towards the luxury end it makes these figures even more remarkable. To report these figures as 'dire' in the current climate is plain stupid.
I still maintain that your hidden agenda is to talk down the economy to the point at which you will invest in property and oil and then reap the benefits of the near hyper inflationary period that will inevitably follow.
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Who cares what Simon Wolfson has to say or even thinks? I can't even remember the last time I even visited a Next shop. The majority of the retail sector has for too long concentrated on profitability and almost totally neglected the major reason for their existence - the customer. Even during the Christmas period when there were supposed to be such fantastic bargains on offer that we would be unable to resist they failed to entice enough of us. For too long retail has failed to deliver customer satisfaction. So Wolfson and Rose can sit in their respective HQs and pontificate to the City but they can't change (or even understand) that the market fundementals have changed. As money in all of its forms gets tighter that we, THE CUSTOMER, have changed from a must have to a may have audience.
Just putting tat on a rack no longer satisfies us. We demand more in terms of quality, prices and yes - customer service. If M&S and Next are to survive then they need to re-focus on maximising customer satisfaction and not maximising City expectation.
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Yet more concern on the high street.
Yawn.
It seems all the financial reporters are focussing exclusively on shop closures and struggling sales simply because they are all names we would have heard of.
I am tired of that bad news.
I want bad news and anlysis from another sector please!
We already understand people dont have money to go shopping anymore therefore...hey ..guess what...the shops are doing badly.
Really! I would never have guessed!
Are we really saying shopping is all we have now, or at least all the population knows or is capable of understanding?
Isnt the BBC as a 'public service' broadcaster meant to pick up and communicate the less 'mainstream' stuff? (I am talking to you Robert) for the greater good of the nation?
How about some commentary on what has now become the 'invisible economy'. i.e. anything that involves making real stuff or getting your hands dirty.
How is Joe Bloggs haulage company doing?
Been any collapses there? How about the guy who makes specialist industrial machine parts to export overseas from an industrial park in Manchester?
How is he doing? Any collapses there?
It may not be glamorous but it is just as, if not more important and newsworthy to cover what has become the 'invisible economy'.
An invisible economy that, funnily enough is the thing that makes the 'real stuff' which we will probably have to come up with again to pay our way in the world, or at least be mostly self sufficient.
There is more to buisiness than Marks and Spencers, the Banks and House Builders. We already know about all of that.
It may not be so glamorous but consider how focusing on the glamour of high finance and posh shopping has got our economy. Your commentary focusses only on those, isnt that part of the cultural problem of our society now? Too posh and clever to get our hands dirty?
Those nice far eastern places make all the stuff for us to buy. Those nice eastern european people build our infrastruction and fix our plumbing....
Tell us something else please. We want to start to hear something about the solutions now and it wont involve more shopping or more fancy financial instruments or borrowing.
Off you go then Robert, we have a nation to re-build here.
Jericoa
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Be interesting to see how Tesco are faring. Bet their sales are up. There's nothing like a recession to sort the sheep from the goats. We've seen M&S blame external economic conditions for most of their woes over the last couple of decades.
Simon Wolfson's comments are much more interesting. Nice to hear someone influential actually telling it like it is.
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#102 Spur22
In my rush to clarify matters, I forgot to add the words "from the BBC" to the line you qouted.
However, you are, of course, entirely correct.
The history of news is littered with proprietors who have tainted their reporting with their own views (Hearst, Maxwell, etc, etc, etc). A punter could take their pick, knowing what they would be getting.
The difference is that WE are the proprietors of the Beeb. Since there are so many of us, with so many views, we are, I think, entitled to unbiased, clear reporting.
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Bad news Peston strikes again with his schoolboy economics and this will not be shown as he is his own moderator.
Why do people ever listen to him
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"So he is closing 27 less profitable stores"
What does this mean? Are they loss making? If he closes a store that is actually making a profit, then he makes less profit.
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You are not very good are you
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Clearly it is not sensible to use year on year as a comparison as 2007 was bloated by cheap credit and irresponsible spending practices by consumers who were still in buoyant mood - Now those same people are asking just how many clothes do we really need? Yes their will be an overreaction, yes the media plays a role in fueling that, yes innocent people will lose their jobs and good companies will go under too. There is no overnight solution to the problems we are facing, but moaning about it will achieve nothing.
The readjustment in our economy which will increasingly be seen in sales figures for 2009 is entirely reasonable given the unsustainable credit fuelled growth of recent years - to get an idea of how things are perhaps we should compare sales figures from 2000, 2004 and 2008. I would call it a normalisation of the economy, this is what happens when households are forced to balance their books and not rely on deferring payment to the future, it is healthy and sensible and should become the norm. Taking out a loan for a car or white goods is fine, but paying for the weekly shop on credit card is surely not a good thing?
Successive administrations have done nothing to prevent consumers racking up world-beating levels of personal debt (in Germany or France it just isn't possible to get a massive credit card allowance - legislation prevents this. Shouldn't we also consider introducing this, not just for the protection of individuals but the economy as a whole? Perhaps allowing no more borrowing than 30% of net income on credit and store cards would be a start?
Consumers will have to live within their means and as a result the flow of money through the tills of retailers will be reduced.
Only those whose goods deliver what they promise that deliver a satisfactory shopping experience will survive. M&S simply has not moved with the times in terms of shop fittings and "shopping experience" in a number of stores I have visited, looking tired and worn.
I feel sad that so many people in this country will suffer as a result of this crisis of confidence. Perhaps we can draw some positives from this in that we all collectively need to behave in a financially responsible manner and not constantly cave in to marketing hype shouting "you're worth it"
Let's not all succumb to doom and gloom, the days are getting lighter and spring is on the way, where are those t-shirts I bought last year?
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These words appear in the Peston comments - truly horrible, pretty dire, more disturbing, ghastly bit etc.
From what I can see Rose is reacting well as a manager. The economic background is poor so what should he do?
Cut staff, close low profit stores, do well publicised promotions, reduce inventory, spread his risk(overseas and Internet) ...............whoops, he's done all that!
Profits will still be north of 500 million. It could be worse, he might have made a loss and that's what I would call horrible, dire, disturbing and ghastly.
How you see it, depends on whether you are glass is half full or half empty person!
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#116 - well said!
We're fringe, see!
GC
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#104 danielmhudson1
"MS is overpriced and staff seem to do nothing but talk to each other. Too few tills operating."
Do not complain about the service. There is none!
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Re: quality
I agree with previous comments that the quality of goods (clothing in particular) at stores like M&S and Next gets worse every year. Things are just not made to last.
Am I the only person that doesn't mind paying a fair amount of money for good quality products that actually last?!
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Joe Bloggs haulage company is probably doing OK. Fuel prices are coming down and all the stock being sold at lower prices has to get to a shop or internet warehouse
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I repeat my comment which seems to have disappeared down a BBC black hole
Marks and Spencer issued a press release. Its done to manage shareholder expectations. You are supposed to be a journalist. Do some investigation.
Marks interim results to the end of september 2008 show group sales up 0.8percent. The statement for the next 13 weeks show a decrease compared to 2007 of 1.2percent.
Mr Rose seeks to blame these minor movements on UK consumers. He is softening up the position where annual profits are substantially lower but still profits.
Analysts predict a drop in annual profits of 30 percent or more.
Perhaps Robert, you'd like to ask Mr Rose why this might be. Could it be the massive increase in borrowings or the slump in sterling after interest rates were savaged.
Nothing is what it seems but M&S is still a sound, profitable UK business. Just tell it how it is
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A belated 'Happy New Year' Mr Peston.
Another article on M&S makes for well-trodden and cosy reading. It is a pleasant enough way for you Sir to earn a salary.....and bloggers to be informed and entertained.
But are you being tough enough on the Central Questions of the Mis-governance of Britain ? There seems to be to be an absence in your approach. Raw, really raw questioning of the UK's Ilustrious Governing Elites...there is plenty of scope for detailed examination of key players in Banking, Auditing, Government, the Media itself even.
Your most urbane colleague, Mr Andrew Marr was in Downing Street on Sunday. He tried to be tough with the PM over Gov't 's culpability for the current situation in UK Banking plc. But to me his questioning came across as a kitten playing with his master's ball.
For 2009 ALL BBC's Journalists should BE TOUGH, BE PERSISTENT....BE RESOLUTE. Hold up a mirror which reflects but does not distort ...you and Mr Marr have cosy jobs, you'll not be sacked .
NOW is not the time to indulge in cosy rapport with your interviewees, NOR to take on cosy subjects.
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52 Guycroft
I know you have problems which are not of you making, along with others. However that is no reason that this blog should be the sole preserve of people in that category. That does not mean problem impacts should be ignored. I suspect your market sector has been hit hard and the question is will it come back.
My experience is if you are in market sector that is hit it does not come back to the previous level. Sorry but that is my experience. I had a bad experience in the early nineties when you presumably did not. That is the way recessions go, they are arbitary in impact. When I had people standing on my head trying to push it under water others were relaxing in the sun.
If you think this or any other government will take measures which will restore a collapsed sector it is most unlikely. You likely face, as I did, taking drastic steps to find a different state of play. Sorry but that is almost certainly the fact, and I think you know it. You are almost certainly wasting your time petitioning a government which is pretty much bust. You are almost certainly a grafter so you will survive in one shape or another. You would be better off focusing your undoubted energy on progress.
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I tried again and got this gibberish back:
'Data at the root level is invalid on line 1'
I assure you there's nothing wrong with line 1!
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#52. At 10:19am on 07 Jan 2009, guycroft wrote:
"I see no initiatives coming from any party that will encourage regrowth of the economy with 'non-internal' money. The socio-economic consquences of this spiral, well, they're obvious to me at least. All this guff about the UK being able to exist as a service based unit, barmy, completely barmy."
Excellent post
For 40 years we, as a company, have been involved in manufacturing. Constantly evolving with the times - accepting that business requirements change - unfortunately, some haven't and are going to the wall.
What I really can't get to grips with is that as a nation (government - either colour) we have allowed our manufacturing/production to decline to such an extent that we have no base to fall back on in these lean times ahead. As the 'service' industry jobs reduce in number there is nowhere for the unemployed to go. The consequence of all this is that it is going to take so much longer to climb out of the hole we are in.
Rebuild Britain 2010 - please!!
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Of course there should have been a refund for income tax payers instead of the VAT cut.
All the administration work has been shifted to registered VAT traders.
Government cocked up the 10% lower rate of income tax and did not want another disaster on their hands just a few months later.
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Robert
Perhaps you also like to consider the vested nature of press releases from lenders, estate agents etc.
Perhaps the industry is flapping about losing so much income from fees from arranging mortgages, for example.
Say average fee is £750 per mortgage and new arrangements are down by 30,000 per month (conservative). This is £270million.
This might also explain some bleating from the government about ghetting lending going again. Think how much it has lost in stamp duty from the reduced number of sales. Add that to the lost VAT and you are looking at number that I might now get out of bed for. No wonder Darling is talking things down again.
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86 sashaclarkson
Yes you are on the money there, but with one previso, that is that overshoot always occurs both on the way down and on the way up. That is where it gets difficult isnt it. So where are we, still on the way down is my guess.
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@ 118 edgarbug
Yes, understand, but you may be missing the point slightly.
In any circumstances the Beeb will be closely reflecting the concerns of the government. It's a simple reflection of proximity to power, or, access - as discussed).
It would be no different if a.n.other party 'ran' the government.
So, if the economic power the license fee grants is 'filtered' by the government - the broadcaster will, despite best efforts to maintain impartiality, reflect some of that. (See Iraq-Gilligan-Dyke crises past).
We aren't, or can't really ever be the proprietors of the Beeb, we just pay for it if we have a TV license.
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I'm afraid I don't have anything to say about M&S, I don't shop there, I always have the feeling thaey are a bit pricey.
As regards the Vat rate charnge, think it was clear from the outset that this was just a political stunt played by that Master of Deceit Gordon Brown. What interests me is why when all the talk is about massive borrowing has the talk about the waste in our enormous and useless civil service stopped. I recall both Tories and LousyLabour telling us how much they were going to save the taxpayer by greater efficiencies etc etc you don't hear of it now when the need is even greater. Ofcourse we know the opposite is going to happen-how many of the newly unemployed will end up civil servants, quit a lot I'm sure.
There are massive savings to be made:for example, I worked in the finance department at Coventry Primary Health Care Trust for a while (I know its NHS but its the same mentality), none of Management Accountants not only knew nothing about Accounts but when asked could not even tell me what their jobs entailed, 8 of them at £31000pa, neither could their Manager, he was on £45000, although he was very good at arranging pointless meetings. There's loads of scope for savings- even the Dumbos of Downing Street should be able to find some.
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For all posters bemoaning the state of the economy and how shops are suffering.
The consumerist part of the economy is driven by the creationist part of the economy. By creationist read "turn widgets into gadgets" and the net effect is that the monies inside the state boundary is larger.
If the monies just move around internally, they will by dint of imported inflation contract in real terms.
So exporting is the only way to solve this - devaluation of the pound is good - makes our goods and services cheaper to the world - note the term "goods and services."
If we have a lack of traditional manufacturing base exporting - coal, steel, shipbuilding etc. these have contracted and will not provide the base needed, then new exporting industries need to be sustained and grown - computing, energy, financial etc.
If all you concentrate on is discussing the consumerist part of the economy then it will not happen - we need to concentrate on the creationist part.
I would dearly love Robert Peston to turn his thinking power into that part of the economy rather than spend the next year simply repeating "oh it's all going to hell and a hand basket" - yesterdays news - get back to what you do well - discover tomorrows news and tell us today on how the creationist part of the economy will grow.
Basic belief - like it or loathe it - large scale financial services will need to find UK a welcoming place to do business if we wish to play on the world stage from this point on.
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52 Guycroft: I would, like you, like to think someone out there was taking notice and reading our thoughts and concerns but in all honesty I think we are all spitting in the wind. ( I don't think even Robert bothers- the only ones who do, are probably the moderators- poor souls!)
There are no politicians of any calibre what ever their colour, capable of seeing the real world, the wider picture without having to cowtow to their own political party before they open their mouths. All politicians have a short term memory problem, only capable of seeing the next general election and quite frankly, that is all they actually care about.
Next election we should all be able to vote for no confidence in anyone or we have proportional representation and hope that no one party wins and then maybe they have to start talking to each other about solutions not making banner grabbing headlines. Parliament often resembles a school playground.
If someone would start a commonsense party I would vote for it because there isn't a lot of it about.
We really couldn't have gone on the way things were and with all bubbles they burst. We would like to think that the sitting Government had overall control but sadly this is not the case.
As we have see from Robert's blog the media have far more control, influence and persuasion than any political party.
The crisis may have been started by the financial sector but it has most certainly been exacerbated and continued by doom and gloom merchants within the media and until they get bored of writing the same old message, we will stay in this rut.
Robert tells us until confidence returns then there will be no stability but is he helping I think not.
The world does have to stop producing all this cheap consumer rubbish, it does no-one no good in the long term. Its just a great shame it wasn't appreciated earlier, say 25 years ago but then no politician would have stuck his neck out and been unpopular. Environmentalists did and they were humiliated for being so bold.
The Government are in a cleft stick because if they had regulated the financial sector they would have been accused of being a 'nanny state'. The banks, if I recall said they would regulate themselves!!!!!!!!!!!!!!!!!!!
The planet simply cannot sustain the growth we were experiencing. Why is it so imortant that companies maker bigger and bigger profits each year? and why are they a failure if they don't, even though they maybe a very profitable company?
In the long run if one company succeeds in taking all there is out for its sector, then we have no competition and they can charge what they like for their goods and services. Market forces only works in the short term-once competitors have been squeezed the winner takes all.
Its like football, if you have a league table someone has to be at the top and someone has to be at the bottom, yet somehow football clubs and football pundits still haven't grasped this and want the manager sacked at the bottom of the table.
As for the retail sector its far too top heavy. Years ago the proprietor probably owned his premises, possibly made the goods he sold, lived above the 'shop' and the money went round the local community. Probably no waste to speak of, no huge lorries trundling across Europe bringing in stuff we don't in all honesty need, desire maybe but not need.
Now the retail sector buys in from abroad, where some poor slave in India works for next to nothing.
The shop then sells those goods and pays all the on costs including rent, service charge etc. The shopping Mall or centre has a Centre Manager on £60K, plus all his staff, above that is the national company that runs shopping centre/malls on behalf of the property company, who also have to be paid. All of these companies have shareholders, who also need paying, plus all the PR & marketing guys. Its obscene that someone in India is supporting a whole infrastructure that we simply don't need
Shops also have to look at opening hours. Capitalism is all about stealing a march on your competitors and its fine when the first one starts a new trend but when that becomes mainstream it serves no purpose.
Retailers in Germany and France close on Saturday afternoons and often don't open until 2.00p.m. on a Monday afternoon and yet they still seem to thrive and their citizens still seem to find time to shop. In some places they even close for lunch!!!!
Although this is a very painful process which some of us knew had to happen, it should/could also be a time for the world to come together and realise that we are all in this together whatever our political persuasion or religion. We have only one planet, we have only limited resources, we cannot buy anymore in from somewhere else. We all only rent the space we live on, for the time we are alive. We cannot take anything with us when we die, rich or poor. Some might have had a silver spoon in their mouths when they were born but that counts for nothing when death knocks on the door!!!!
We are told the wealth generators need to be rewarded but this was a rumour they cleverly put around themselves. We need a more balanced society because those 'at the top' cannot function without the experience and skills of those around them they make a company thrive or fail.
We in the UK now need to concentrate on building a sustainable skills base and look towards building a self sufficient society not based on more and more but on quality.
Now the pound is weak and the demand for higher wages has started in the developing countries we should be pulling out all the stops to take this Country forward and Robert could help by offering positive comments.
Hindsight is a wonderful thing and he seems to have it in abundance.
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A re-write
Marks and Spencer seems to have pulled of a minor coup over the last 13 weeks. Despite what have been described as difficult trading conditions, group sales dropped by a mere 1.2 percent and the company is likely to make profits similar to that seen in the year ended March 2007. This, in the face of wild swings in currencies and LIBOR rates over the last, should be seen as success for one of the old names in British Retailing.
Likewise Next also reported much better than expected results.
Shares in both companies have risen in early trading today.
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Seems to be Robert Peston being overly melodramatic. Is he worried that he'll be less famous if there's not a crisis?
I heard the interview, and the point that Simon Wolfson made was that this IS an ordinary downturn, and not the end of the world.
Rose pointed out that 25 of the 27 stores closing are small Simply Food stores which were opened but are not making the hoped-for returns.
I really wish the news would stop playing up this story and spreading needless gloom.
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Number 71 - bang on!
The public 1) like buying 2) value 3) easily and therefore internet shopping is going to get bigger and traditional high street retailing smaller.
I am an estate agent without a High Street shop - and in 5 years I predict we will be the majority and not the minority.
Interesting times indeed.
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Well,well!
It seems the optimists have brought their deckchairs out.
What about what this chap says:
http://www.telegraph.co.uk/finance/4125947/Willem-Buiter-warns-of-massive-dollar-collapse.html
Quote: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets."
Call me cynical,but seeing as he is employed by the LSE,I would say he`s being just a tad economical with the truth regarding the 2-5 years timescale.
I think it`s more likely that the dollar/pound/possibly Euro, will collapse this very year.
I`d like to thank the person who gave me this link yesterday:
http://www.howitends.co.uk/
The political class are running this nation into the ground because if they admit what the true state of affairs is re:public finances and non-production of wealth,there would be intense public outcry.
They`ll draw their fat salaries and expenses till "Judgement day" arrives,all the while soothing us with "warm words".
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Well it seems that everyone now knows the government's reaction to this crisis is rubbish apart from the government itself.
Are they being just downright obstinate by not admitting it or is there something more sinister going on.
Time will tell.
Restructuring companies is the name of the game now and if businesses ignore this there is only one way to go.
Sir Stuart Rose was one of the first to tell us how bad and how long this recession would be.
Pity he was ignored by GB. I don't even mention AD for he is only GB's puppet.
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#130, Glanafon, thanks for your cordial reply.
FWIW I did exp the 90s recession too.
G
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Simon Wolfson is, of course, correct; the reduction in VAT costing the taxpayer 12bn pounds is a complete waste of money.
The government should have cut income tax for the lowest earners and increased benefits for the poorest in our society (James Purnell wouldn't have liked this one), however, it would have worked.
New Labour are taking measures but unfortunately they're the wrong ones... they should have spoken to Vince Cable. He's more interested in our country than in playing politics.
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132, 139, thanks for remarking on what I wrote (among other things).
How long before those of us 'hanging in there' lose our nerve? What then?
Seriously!
GC
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Seems to me that we are getting rather carried away here.
As I see the main players are as follows:
Gordon Brown- Captain Mainwaring
Alistair Darling- Sgt. Wilson
Mervyn King- Lance Corporal Jones
David Milliband- Private Walker
FSA- Private godfrey
Sir Fred Goodwin/Andy Hornby/Adam Applegarth-----to many to mention- Private Pike
and of course the star of the show
Robert Peston- Private Frazer
.......Were ALL DOOMED!
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I work in Aerospace - which is doing okay by the way. Several bloggers have stated that we need a manufacturing base - I disagree. Our costs internally are close to 200USD per hour compared to our Indian suppliers and factories at one tenth of that.
If we treat the UK like a company, we should just make good decisions based on what we are best at (without leaving us too exposed in case of WWIII etc.). We should be selling organic welsh lamb abroad as a quality product not competing with the plains of the US on std grains.
We should be designing innovative bits of cars or whole cars like Lotus not competing with BMW who did it better than us when we were doing it in a bigger way. Knowing the cheapest place to get something manufactured and the best person to design it and having the money to pay them is more important than knowing how to build or design it.
Investing other people's money also has it's place as long as we do it well.
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Who cares what Wolfson and Rose have to say. They only typify what is wrong with British business - in all of its forms. They are caught up in the Corporate Game. Their prime responsibility is to meet City expectations or explain away the reasons for not doing so. However, they are supposed to be the heads of retail organisations. Therefore their prime focus should not be The City it should be US.
For too long the major retailers have lost sight of the reason for their existence. They should be focusing upon maximising customer satisfaction and in so doing creating their profitability. However they have ignored our needs and offered us lower quality, less service and left us minimising our dissastisfaction.
I can't remember the last time I even visited a Next store. Why should I? There is nothing there to excite me and the prices are too high for the quality offered. I don't care about Wolfson's politics but I do object to his audacity in blaming the lack of skill in government policy when his own failings are there to see.
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#140. mrsbloggs13c2
As a lay person with a mild interest in economics I would have said your re-write is entirely reasonable. But what do I know?
I am relying on this highly paid economic and business 'editors' to condense, de-froth and remove spin from PR statements for me.
I now have doubts the Mr. Preston has done this on this occasion.
And BTW, now I wouldn't be seen dead shopping in M&S. Overpriced psuedo snobbery product range (especially the food) based on the few times (albeit 5 years ago) I was dragged round by the missus.
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A few little projects for Robert. It might involve a bit of real work rather than reaction...
Have companies with dollar or euro earnings seen their position improve in the last three months?
How will changing commodity prices impact on earnings - please consider large and small SMEs?
Which coprporate clients/investors did RBS and HBOS lend to and where did they get their money to do so?
Do either of these institutions have assets that could be sold to shore up their balance sheets rather than relying on the UK tax payer
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132 johnathanmd
The UK let its manufacturing base slip because it was not easy money. Property development was, it is really land value speculation assisted by government planning policy. The financial sector is also easy money. There is no R and D, no production capital, and little risk, until recently. Coupled with low labour rates elsewhere and thats it. The UK economy does not help, Galbreith wrote that the UK economy was difficult to control due to the level of imports. Some of the problem is resident in having had an Empire although some do not appear to want to hear as much. The British Empire ran on the basis of shipping high value added manufactured goods to the colonies, then in turn the commonwealth, and buying cheap raw materials in a monopoly trade each way. In fact for a long time aid to commonwealth countries had to be taken as machinery, it really was just a small discount on trade. Take the Empire away and there are problems, you have to build new trade networks and markets. Add to that a UK public acustomed to imports and there are further problems. The German public for example, in the main, have historically bought German cars, whereas the British public have steadily imported from across the globe. We have a history of innovating but failing to exploit commercially. At this stage it is questionable if we have the technology base to easily innovate as things have moved on from the garden shed inventor and require capital. I dont know what the figures are today but manufacturing used to be something like 60 to 70 percent of exports after the second world war and is a small fraction of that now. Politicans are obsessed with the UKs position in the world in terms of foreign policy not trade. Look at Blairs behaviour. Red teeshirts in Albania, off to the US, internation intervention. Punching above our weight etc.
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#149
"Our costs internally are close to 200USD per hour compared to our Indian suppliers and factories at one tenth of that"
... well... stop outsourcing to India.
Then your cost base makes sense, and well it should for a high tech industry.
We all know where outsourcing came from and how it's routinely used as a weapon to drive down costs at every level internally and at subcon. The Inst of Purchasing and Supply have much to answer for.
I say - 'Protect and Survive' your industries will have to be rule no1 in the brave new world, not - (dare I say this?) shareholder, er, 'benefits'.
GC
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#148, Alistair Darling Sgt Wilson? No, no, no, definitely not, however, I think the verger is much more appropriate.
As for the bankers you mention, definitely the downed Luftwaffe crew.
The worrying thing about your Robert Peston analogy was that Fraser, in a sense, was always right.
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"well-publicised and unprecedented promotional days"????
Well, they were certainly well publicised. Even I went into M&S just after Christmas, and I (no doubt in common with most middle aged men) almost never go shopping for clothes unless I really have to. I thought it might be a good time to pick up a few bargains.
How disappointing to get to the store and find that only a fraction of their menswear lines actually had any money off. Despite all the advertising of "massive savings", most were still at full price. I left having bought considerably less than I planned to.
Oh, in answer to #22, I don't know about the other 69,999, but I can tell you what one of the staff was doing: standing guard outside the fitting rooms to make sure no-one went in. There was a sign saying that they were closed "in order to serve you better".
It seems to me that the company isn't even giving the most basic of thought to what might make a good impression with their customers and what just going to annoy them. That is not a good way to run a business.
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why must all of these kind of blogs be so cutting and negative.These articles are so negative and all the mess we are in at the moment has escallated becuase of the journalists talking us into a recsession. Do you want the country to fall?
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Oh, just a quick question: I notice that they are making their pension scheme less generous. Does that apply to directors too?
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For all the sale talk, I see margins have been maintained especially at Debenhams. Sales my foot........
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#149. At 1:33pm on 07 Jan 2009, Aeromonkey2 wrote:
"I work in Aerospace - which is doing okay by the way. Several bloggers have stated that we need a manufacturing base - I disagree. Our costs internally are close to 200USD per hour compared to our Indian suppliers and factories at one tenth of that."
I fully understand that innovation and quality is a way forward. The downside is that, as with my company, the staffing levels decrease as technology increases. If this model is multiplied across the board, then yes there are many technically advanced companies still working but there are a hell of a lot of people unemployed (unemployable).
There has to be a balance. There are too many mouths to feed to be a purely 'niche market' economy.
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No 6
"If a company makes 10 profit last year, and 3 loss this year, it is still 7 to the good (to put it is super simple terms). "
The problem is that 8 out of the 10 profit was paid out to shareholders. Then they borrowed 20 that was to be refinanced this year and the rate for that 20 has gone up to 5/year and we have savings of 0 and a loss of -3 Oh oh.....
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Does this man thrive in misery? Did not see much in relation to Liberty or John Lewis. Sorry but is good news for the BBC a problem. It is hard out here and you do not help. The press has some responsibilities.
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95 forfuturessake:
Spot on. But I think we need to consider what the Labour project is - ultimately, to boost the public sector payroll, and the numbers on benefits, to the point where there so many people dependent on the state that Labour gets re-elected ad infinitum.
The critical flaw in this project is that it cannot be afforded because it shrinks the ability of the private sector to pay for it. Labour's big government project ceased to be affordable from current income some years ago. It remains affordable now only through escalating borrowing, and will crash if the government cannot succeed in placing at least GBP 150bn of gilts this year.
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Am I alone in thinking these figures are no more or less than could be expected and therefore not very revealing?
About a third of the working poulation work for the government: none of them have lost their jobs or their shopping habits. Another huge number have healthy government pensions, I dare say they have cut back a bit, but not a lot.
Those who were already living on inadequate fixed incomes stopped shopping at M&S and Next a long time ago.
None of the credit card companies are writing to 'solvent' individuals to reduce their credit line, although they should, so there hasn't really been that much change....yet.
The real systemic problems have yet to filter through. Let's wait until this time next year, we might get a truer picture then.
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comparing sales figures is with last year can no longer be done directly since many stores introduced massive discounts and therefore drastically cut their profit margins in the run up to Christmas.
A 7% drop in sales on product lines that were also discounted by 20% or more surely represents a very significant loss compared to last year.
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Robert Peston is ruining our economy. Always talking the economy down. If there was any good news he wouldnt publcise it in my view.
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The writers above who say that the retail sector is too heavy are correct. I love shopping but in the past few years the choice has become bewildering. Clothes have become so cheap that many of us have far too many in our wardrobes. Therefore, when we feel threatened financially the obvious thing to cut is spending on clothes.
Marks and Spencer had success introducing the Per Una range but now they keep rolling out similar items season after season - do I really need another floaty floral skirt or embroidered T-shirt? I prefer to pay more for something original and well-tailored from shops like Karen Millen and less for everyday items such as T-shirts and nightwear. In fact, I have bought nightdresses in Primark for £3 or £4, which have lasted just as well as any from M&S.
But coming back to the point of too much choice, that of course is what our economy has been built on in recent years. We should never have been spending so much money but clever marketing people persuaded us to do just that. It's a vicious cirlce. Those people employed in manufacturing wanted their share of the good life too so increasing wages costs drove manufacturers to move production abroad. Cheap clothes flooded the market and people who had previously worked in manufacturing moved into jobs in retail or the service sector.
Now shops are closing, where will the next wave of jobs come from? Even without the recession, there must be people like me who have grown a bit tired of shopping as a hobby.
Finally, a word about Robert Peston. I've found his insights into the UK and global economies very interesting and useful but I am beginning to wonder whether some of the pessimism in the media is partly responsible for driving this recession forward. There seems to be a general call for another reduction in interest rates. But what the media should remember is that there are savers in this country. A year ago I was thinking that the interest on my savings could be used for a holiday or Christmas presents. That is no longer the case and so I will have to cut back my spending - the small VAT reduction is certainly no incentive to spend on 'luxury' items for people in my situation! Neither is it an incentive to all those currently losing their jobs.
I don't think consumers can be relied upon to help the country spend its way out of recession. We need more creative solutions.
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Hmm.
I look forward to Mr. J Paxton getting his S&M knickers in a twist again...
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Sorry to be a doommonger but the ONLY bit of good news I want to hear at the moment is:
'Gordon Brown resigns'
GC
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154 guycroft
Not that easy, as Boeing staff found. Boeing wanted to be in China, big potential market, the Chinese being fiendishly cunning or possibly just plain sensible said ok but you have to have set up R and D and technical centres and major production here. Boeing said yes, Seattle HQ staff dumped big time despite protest. Boeing effectively now in China. It is the equivalent of hydraulic flow, it finds its own level. The only place I have ever seen water flow uphill is in Wales, due to the sheer volume of water that falls from the skies.
If one postulates that the flow will continue until the hydraulic table levels out it is not finished yet. International trade agreements prohibit protectionism which it appears you would favour. Social costs and H and S ie overhead or tax burden in these low labour countries are nowhere near on the horizon. So all that is left is niche high tech, small scale highly flexible ie not mass production manufacture, stuff inhibited by transport cost, and national security sensitive manufacture and the service sector, eg stick plastic film signs. Oh, ethical and environmental issues and quality. The question is will satellite manufacturing units such as Nissan remain longterm, not what can be added. In terms of the future smart and small is beautiful, or at least it stands a chance. Large manufacturing units which continue to trim and downsize are kidding themselves, they are by definition in decline.
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Another change of tune from yesterday....reacting to the last bit of news.
This stuff is laughable.
www.notbornyesterday.org
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166 greywizz
I do not think RP offers the most balanced of views but I doubt he is that effective. if he was he would be paid massive sums to talk the economy up or have been assasinated by now. He essentially talks to those with huge debt and those who want to use this bash as an excuse to trim and get away with it without negative comment.
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Fully agree with #156
I too went to M&S to buy a few clothes on a limiterd budget, only to find no discounts whatsoever on anything I wanted - jeans, casual trousers and shirts - ended up buying nothing.
Conclusion: didn't live up to their advertising expectations.
To #166
Definitions of Recession, Depression, Recovery:
Recession is when your neighbour loses his job.
Depression is when you lose your job.
Recovery is when Gordon Brown loses his - or when Robert Peston says so.
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High Streets boarded up.
Houses boarded up.
Factories boarded up.
Such is the legacy of New Labour and their mates the bankers.
We should all buy shares in wooden board manufacturers.
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160 johnathanmd
Which is why the unempolyment sector is due to become a industry in its own right, eg big funding for apprenticeships anounced. Cheap measure, young apprentices exempt from minimum wage, check it out. Unemployed corps to fit loft lagging. Prob hole fixing etc etc. All outside minimum wage criteria. then move to using this body to displace public sector jobs, shrink public sector protected jobs. Introduce more means testing, already floated.
New business has to avoid overhead, go for niche markets too small for mass production, and market direct via internet to gain international customer base. Viral marketing etc etc.
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It is beyond me why so many posters believe journalists like RP, bless his cotton socks, have caused the recession when there are so many more obvious and grave reasons.
Anyway, perhaps the real story here, with shrinking sales in the older shops, shop closures and cutbacks on modernisation is that M&S are acting relatively quickly to move to more modern retailing, which does not require a heavy High Street presence. Given the number of other chains disappearing or downsizing, our town centres are going to look rather sad and empty in coming years.
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Simon Wolfson is uttering only what should have been fundemental mathematics to any high school student, let alone PM Brown. The cost of stores re-labelling, and putting into action all the computer information cost far more in direct expenses to companies than the amount of "possible" increased buying from consumers. It was another "to little - too late - with no ideas" from the Brown administration. It is time the British People for once stop laying down and rolling over to be screwed yet again. It is time to stand up and be heard. It is time for the British public to march in MILLIONS in every major city throughout the land and insist that BROWN be REMOVED from office.
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Calm down dear Robert Calm down .!
The marketing problems of a large store like Marks can be fixed by better merchandising and sales staff looking like they want our money.
How is it the sales figures from Next were good news and the market went up and today's from M&S are exactly the same and the market goes down?
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#148 Pru-dense
Genius!
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Bert - you should pop on to the FT website and see how they have reported these same figures and what the analysts had predicted
a tad different reflection on these results and more realistic I think you'll find
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That Robert Peston, always such a gloom and doom monger.
After all, it's his fault this country is up to it's eyeballs in debt, it's his fault that we rely too heavily on a tettering service economy, and his fault that we've done away with much of our manufacturing base, it's his fault the government let the banks enter a lending frenzy the world has never seen before. And when they lent too much and too badly and needed to be saved from collapse, it was Robert Preston whose fault it was. I don't know how it was his fault, I just know that it was.
I even remember him coming around our house and personally tricking us into believing the lie that house prices would go on rising ad infinitum and it was ok to take out that other extra loan when we really shouldn't have.
If Robert Peston wasn't reporting the news I'm sure Iceland wouldn't be on the verge of bankruptcy. and the western world wouldn't be diving into recession.
In fact, if he shut up, I'm sure the Israelis might stop blowing the hell out of Gaza and rainbows and flowers will fall from the sky instead of munitions.
Robert Peston, the news wouldn't be so bad if you didn't bother to report it.
In fact, if we all collectively put our fingers in our ears and close our eyes really tightly all the bad stuff will just go away.
Probably.
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At 2:23pm on 07 Jan 2009, amazingmrsandy wrote:
"We should never have been spending so much money but clever marketing people persuaded us to do just that."
Also the government NEEDED us to spend too much money because it meant more tax revenue.
Even though we spent too much money and therefore paid too much tax, unbeleivably it was still not enough tax to cover government spending.
Now where is the tax money going to come from as individual spending falls like a stone.
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Will Mr Peston and all others please STOP calling this slump a "downturn"? It ridiculises the situation to call it this as it implies that it is not that serious, that it will soon be an "upturn" or maybe a "turn around". When will people admit that this is a full-blown, like it or not recession, or are people afreaid to use the word?
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One Robert Peston
There's only one Robert Peston
M&S employs 70,000 people, where are they all when I'm in there? I'd love to buy something but there's no one there to assist or take my money.
Sacking 1200 out of 70k is not going to make a big difference is it? But they're only making £600M profit, not bad in a recession!
Money can't buy happiness but I'd like the opportunity to prove it.
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Toxic Debt in the home market and now Toxic Debt in the business market - how many more will sink in the muddy waters of unsustainable debt?
But not too worry the bank manager (who started all this with lax controls) recently told us it will be alright in 2010, only problem he couldn't tell us how this recovery miracle is to be created!
The whole economy is in a mess and we had better get used to it for a few more years yet.
From 1989 to 1998 avge property prices did not move and in recent years the banks and other lenders have fallen over themselves to lend money for speculative purchases.
The chickens are now coming home to roost in their devalued (or correctly valued!) hen houses.
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A good deal more balance on these blogs these days and a few more proposed solutions too. Not just the same old problems. (Not that the balance comes from Robert).
Actually, I do worry about Robert. He is so easily "disturbed". 7% LFL declines are the stuff of a sharp downturn exacerbated by poor product and panic discounting, not of depressions. His colleagues on the BBC described them as their worst figures for a decade and I don't remember things being so bad then.
BTW, someone really needs to tell the BBC that sales declines are partly "because of" and not "despite" major discounting. In volume terms M&S may have sold almost as much as it did last year. More fool them for giving so much value away now that the sales shelves are nearly bare. (After all it wasn't really that difficult to predict that Xmas would come even later this year, given that we had nearly a full week of shopping beforehand).
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following my last post, I was wondering whether there is anything else other than the economic down turn we can blame on Robert Peston.
I'm pretty sure it was his fault we simultaneously went into both Iraq and Afghanistan under what could be described as very dubious legal circumstances. I'm not sure how it was Peston's fault, I just have this gut feeling.
He probably invented rickets as well.
Anyone think of anything else we can pin on him?
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#161
totally true - this is the point I was hoping to imply.
Greedy shareholders or overconfident directors?
Why not re-invest the profit in the good times, to shore up the business for the bad?
as others have said - the info missing from this pessimistic review of M&S's results is glaring.
I love MrsBloggs's alternative. now that is journalism.
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Take away the name and remove the expectations.
Explain to a visitor from Mars that there was a trading company which was expected to provide ONLY £600million profit and was going to make capital investment during a recession of ONLY £400million and that this was constued to be a "truly horrible" result.
Would that my own circumstances were so horrible!
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Mr Peston, I wouldn't like to be one of your children, you seem to be able to only look at the negative in anything.
Yes we are in difficult economic times but surely a more balanced article would be better received.
M & S will still return a very considerable profit for its share holders and i am sure will be expanding again in the not too distant furture, lets try and talk this situation up sometimes.
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Good God! I've just read that Gordon Brown has great news for young workers being sacked due to the recession.... McDonalds is to offer 6000 apprenticeships a year making it the largest provider of aprenticeships!
Wow, young people must be simply thrilled at the prospect, the World is their oyster!
All those youngsters being laid off by Stuart Rose needn't worry after all.
Good old Gord.
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Lest we forget.....
"What you as the City of London have achieved for financial services, we as a government now aspire to achieve for the whole economy."
Source: Gordon Brown 2007 (Mansion House banquet).
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Re comment #7.
I've just finished a short-term Xmas contract with Marks and Spencer - none of the Xmas staff was kept on because of the parlous state of the wider economy.
I have long admired the Marks and Spencer approach, and, having had a brief insight into the daily operations, I can assure Mr Baldwin that the measures it is implementing by cost-cutting, getting that little extra from a very committed staff every day, promoting business generating offers (and then doing the circuit again to raise efficiency still further) means that every employee earns his/her wage. Imaginative rewards for excellent customer service and unbroken attendance recognise, and foster, staff loyalty and a rigorous (but fair) absence monitoring ("if you are absent, your colleagues have to work harder") discourages the "Benylin Syndrome" to the benefit of both staff and customers.
I'm disappointed not to have been kept on by Marks and Spencer but I cannot argue with the rationale. Fingers crossed that Marks and Spencer increase sales and profitability and that they spearhead the return of the recruiting drive.
BTW, if you read this Sir Stuart, I am still available for employment (God loves a trier ...)
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Glanafon (Post # 216, posted on yesterday's blog) - that was an interesting reply. I had to laugh - and agree with - at one of your comments:
"I have mixed with social class 5 the supposed dregs to social class 1 the supposed cream. They are all much alike other than the top draw have money to buffer them."
Someone who works recently told me he saw himself as "upper middle class". This recession we are now in will be a great leveller, when we all realise that there is only those who don't work and depend on others/the taxpayer, work, or are fortunate enough to have independent, recession proof, means.
I managed to save my house in the last recession, when itenrest rates soared, but it meant some frugal living for some time and was one big hassle, caused entirely by drawing down equity so we could live beyond our means. Those of us who work would do well to be prudent with our use of debt.
As to Next's prospects, let's see by next Christmas if indeed they do survive. It seems to me, they, with their dowdy range of clothes will be among the "profitable today, gone tomorrow" brigade, much like the Bank of Scotland.
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#181
Brilliant double parody.
You are cleverly mocking those who object to those who object to Pesto's style.
Aren't you?
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183.
Actually I think downturn and recession are reasonably interchangeable as terms, with a slump somewhat worse. But help us out here and give us some definitions. And please also give us a decent definition of depression, other than the bi-polar disorder that Robert seems to suffer from.
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#139 You've hit the nail on the head about the "regulators". What have they been doing to report on indiscriminate lending and allowing the banks and financial institutions to go unchecked. Unfortunately many of the so called auditors within the FSA are university graduates with English, History, or Art degerees and they have no financial accumen. Besides, they haven't been trained to investigate or report on the financial practices and goings on in the banks. And the same goes for the USA. Countless times I have seen audits undertaken by accountancy practices and staffed by trainees who simply have no financial sense whatsoever. They follow an audit programme which they don't understand, they have no concept of business risk and the same has happened within the FSA. If the reporting standards are not changed this will happen again when the situation relaxes. Will the new head of the FSA take note. Robert, you should do some investigation into the FSA and how it conducts its reviews of our financial institutions because quite clearly they have failed us big time and in 2 years we are all going to pay the price of unregulated financial business. Us taxpayers are going to pay for ever and a day for this mis management. The FSA should be fined.
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Who is that person in the BBC quadrangle thrashing himself with birch twigs and surrounded by holy media acolytes listening to his public utterances of doom?
Oh, just the usual is it?
Yawn....
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WE DON'T NEED A MANUFACTURING BASE?
#149 Aeromonkey2 said...
I work in Aerospace - which is doing okay by the way. Several bloggers have stated that we need a manufacturing base - I disagree. Our costs internally are close to 200USD per hour compared to our Indian suppliers and factories at one tenth of that.
How do the Germans manage to do it then?
I'll tell you....by making high quality products with high levels of automisation designed by skilled engineers who work damn hard. Not only that, they plough much of their profit back into high tech R&D and fanatically protect their hard earned IP.... i.e. by not just giving it away free to the the Chinese or the Indians.
Thats how!
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I have been twice in the last two weeks to buy thermals at M & S , and in the middle of the coldest winter in decades they were out of stock!
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185.
Not quite right on house prices, I'm afraid.
Av'ge 1989 - £70,383
Av'ge 1993 - £64,239
Av'ge 1998 - £86,835
[source - HBoS economic factbook]
1989-1993 : -9%
1993-1998 : +35%
1989-1998 : +23%
By the way, the main reason that house prices kept falling for so long (4 years) in the early '90s was that for most of that period (until September 1992) interest rates were kept v. high because of the ERM.
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187 & others
I don't blame Robert for the recession. I don't even blame Gordon for it (entirely). What I do sometimes blame Robert for is sloppy, biased and sensationalist reporting. Which is a shame because he spoils much that is insightful and informative.
I do, though, believe that the way this recession is reported more generally in the media does have an impact. Don't try telling me that sentiment has no effect on the economy and that the media has no effect on sentiment. That is one of the few things I am pretty confident about.
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#183 Pitouret Quite Right. This is a SLUMP it's not a downturn or even a recession.
people on here are only just waking up to the fact that imports are costing more due to the value of the pound and most of these price increases are yet to hit the High Street. Just as the first real sign of this disaster shows - unemployment - High Street prices will rise.
Germany just announced that it's unemployment rate has just topped 7.5%. US analysts are predicting the next larger wave of redundancies and have already "taken into account" Obahma's relief package before it has even arrived!. China and India are reporting recessive tendencies. So this isn't just a UK problem that will react to any form of quick fix. Things are going to get very nasty and stay that way for some time -get used to the idea.
In the small window of opportunity that we have available we need to reposition the whole nation to try and protect us from the worst of what is to come. It may appear protectionist but any government has a responsibility to protect its citizens (oh sorry, we are subjects aren't we) before any responsibility for global systems.
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Robert
Have you ever seen the Spencer Tracey classic "Ace in the Hole"? In it a previously little known journalist stumbles upon the ongoing story of a man trapped underground. He has a virtual exclusive and gives hourly bulletins on the man's health and the progress of the rescue mission.
As the film progresses it becomes clear that Tracey, intoxicated by his rapid elevation to fame has been exaggerating the story and, worse still, hampering the rescue effort in order to keep the story going with the end result that the trapped man dies!
Recession is a state of mind as much as anything else and the saturation doom-mongering has gone beyond objectivity. You wouldn't want the trapped man to die for the sake of a little extra-publicity would you?
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Forfuturesake No 95
I agree with everything you have said and I think exactly the same as you. This is a very dire situation we are in and Peston is only telling the truth, were we go from here is a mystery to me too.
The trouble with the British public is they think if you do not talk about an issue it will go away somewhere. They would rather read about some non celebrity or hear about how wonderful things will be once we get over this little difficulty like the economy, that is why the inept G. Brown has done so well by telling us all 'what crisis' we are perfectly placed to weather the storm etc. whilst pulling us further into debt.
Peston is right to point out that M & S is more an indication of how bad things are, and how bad they will become than anything else. However people would rather believe they sell the wrong pants or something.
Where Peston and I part company is when he plays politics like reminding us that Wolfson is a conservative, instead of talking about how qualified he is in retailing and probably knows the way forward better than anyone.
It is only when in the future their children and probably their children are sill paying for Government debt they will wake up and smell the coffee.
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I can't help but think Robert Peston is taking great pleasure in the current downturn and continually taking a very negative view on things.
Clearly he has a vested interest in exaggerating the problems and therefore prolonging it by scaring people, nobody had heard of him beforehand, now he's everywhere.
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Some of the Companies closing down or drastically cutting jobs and outlets may have no option and are simply paying the price of their fragile business plans and the banks' brutal "cold turkey" implementation of their revised credit policies. Others...M&S, Woolies, Wedgewood et al seem rather too quick off the mark in pulling up the gangplank for shareholders and execs while throwing staff out of their jobs. Are we seeing the unacceptable face of capitalism in action.. and an indication of why Robert's "New capitalism" is badly needed?
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We've hammered these blasted nails on the head to death and to no end.
We still have Micawbers coming in saying "Be Confident, Something Will Turn Up". That makes them Confidence Men - their only reason why is "the only thing to fear is fear itself", and that's no justification at all.
More objectively, they're in a state of denial, of fugue, unable to face the truth, that this economy is fast resembling a headless chicken.
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Why do you categorise Wolfsons views (Next) as political by referring to him as a Conservative supporter?
That sounds as if you might be a government spokesman, defending a government position. I am sure you do not wish to create that impression as a responsible and unbiased financial journalist.....
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#192 - that quote is completely priceless - should be in a Tory Party Political Broadcast.
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RP is taking great delight in being in an almost unique position to view and comment upon one of the greatest economic upheavals that we have ever seen.
At some point in the future we will be able to look back upon his stories and comments and put them into context. Only then will we really be able to comment upon skills or otherwise. Until then let's celebrate the fact that we do have people like him to bring us the news and their thoughts.
I just wonder who is going to take the same role in over-viewing the political and social fallout from this slump?
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199 bankslickerminuswhatnot
You are correct manufacturing is helpful but I have previously tried to explain some of the difficulties part cultural, part historic, part labour cost, part political origin that face UK manufacturing.
Having worked in manufacturing, R and D, etc etc I have actually seen the scenery fall down. The first blue chip engineering firm I was with had 12,000 staff when I joined them, and now I believe has less than 30 technical staff and some limited consumerable production.
To suggest that UK technology or work ethic is the problem is wrong. We have educated the world and they are as good as us now and work as hard. When checking (some years ago) now on the progress of an RandD project placed with a blue chip British Uni I was introduced to a Japanese Masters student sent to the UK by the Jap Nuke industry. He was regarded by his employers as worthy of fast tracking, and sent here to study. He was studying cavitation damge in pumped systems.
Incidentally you also have to consider the investment and commitment to long term critical infrastructure development shown by countries such as France and Japan with difficult longterm technologies such as the Nuclear industry and compare that with the prolonged rundown in the same sector here in favour of quick fixes such as Thatchers dash for gas powered stations. Labour is no better, we are now importing French EDF nuke plant knowhow.
With respect to Germany, the businesses there are run by engineers not accountants and have a longer term view on investment (the same is generally true of Japan I believe, ie not short term). Germans favour German products where the British take pleasure in buying imports. The Germans are also very good at writing DIN standards, the direct equivalent of British Standards, often adopted as a BS due to lack of UK government support for BS drafting. DIN standards that suit German suppliers locking out others. Why do you think wheelie dustbins are supplied by Germany, is the UK incapable of making plastic Wheelie bins, no - it is procurement baloney by Local Govnmt.
You are probably a tad optimistic about the future of German industry. They are bound to be in better shape than us they have fewer politicans who have made money in property development, realistically this countries main interest, other than posturing on the world stage.
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208 rahere
The landslip occured 2008, there is still some movement going on. Those with inapropriate debt are to fail. Consumption will drop. You didnt expect it to be over that quickly did you. The rest get on with getting on.
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Why is it that when you read the Peston blog, you get the impression that the world is about to fall apart, but when you see the facts, it's nothing like as bad as Peston says it is. He always focusses on the negative and exagerates beyond belief. Yes this is not a great time and yes the economy could reduce by maybe 1.5%. But that still leaves 98.5%. It could be a whole lot worse but it might, just might, be not so bad in two years time. You know, we may just survive this. And before we get the next epistle saying it's heading for yet another disaster, let's have a bit of balance. We still have food, warmth, most have work, we are not at war. Even the weather outlook is getting better. Think positive.
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206. GraemeJCox
I think you have to ask yourself: did the story make Robert? or did Robert make the story?
If you think one journalist has power over the entire economy, no, scratch that, the entire world economy then Robert Peston must have more super powers than Gordon.
The reason Robert Peston is all over the news is because he was the business editor of the BBC when this whole mess began, and people, quite understandably wanted to know why and what was going on.
I think all those out there that want the press to stop reporting what is going on, really just want the public to go back to sleep and start spending the last of their cash reserves on useless high street tat that they don't need when they should really be building up a financial safety net for the bad times ahead.
The money supply is contracting because banks are no longer lending and the credit tap has dried up.
Hence the high street companies falling like dominoes, their whole business model was based around access to easy and cheap debt. Without it, they're screwed.
The banks are not lending because they've filled their fat little bellies on bad investments and toxic debt (which as far as I know, they still haven't revealed the true extent of).
I'll make a prediction for you.
I might be wrong, but I'll bet you a tenner (which will be worthless anyway after some Quantitative easing) that this downturn, recession, depression, whatever, will only end when the banks are feeling a bit better about all the bad stuff on their balance sheets (most of it hidden away off the balance sheet in SIVs, by the way), and feel that they can ease open the credit taps and start the whole credit expansion cycle again.
When Robert Peston reports that they are, I'd feel safe about buying crap I don't need.
Until then, I suggest it might be time to build a safety net.
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208. rahere
as usual I find I sympathise with your comments, however I am anxious to know ...what is a state of fugue?
I like Bach's Art of Fugue, though even that sounds tired and worn after too many inferior repetitions...
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#192:
I would absolutely love that quote to be true, but sadly I fear it isn't. The full text of that speech is at http://www.hm-treasury.gov.uk/speech_chex_200607.htm, and nowhere in it can I find your quote.
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#192:
Sorry to have doubted you. The quote is absolutely correct, but I was thrown by your posting the wrong year. The quote was from 2002, not 2007. See http://www.hm-treasury.gov.uk/speech_chex_260602.htm
Anyway, now I know that the quote is accurate, it has totally made my day.
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If you read only the postings dismissive of naughty Bobby Pesto's doom-mongering, you would think he had been sitting too close to incompetent bankers and politicians for the past 6 months and some of their mediocrity was maybe rubbing off onto him.
In fact, if you read his blog he is actually reporting pretty clean, concise facts on M and S or the retail sector, and if you click on the highlighted link called '... story it tells...' you get more undecorated information.
I think Bobby could just write-
'I got up this morning and had a nice cup of earl grey tea in my slippers' and the comments would just self-generate like always.
The point is Bobby's blog is like Hyde Park Corner in the old days; you stand up on a soap-box, start a discussion and it grows legs from the audience and the hecklers.
But I just hope he gets time to read the responses, because there is some seriously-considered work and suggested web-site links being offered by Pesto's Posting Army.
it would be a pretty poor show if only the moderator read them.
Go'on yersel' Bobby.
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212 glanafon
You mention RandD projects placed with a Blue Chip UK university.
Red rag to a bull as far as I am concerned..
Why was the RandD work placed with a state subsidised company (university) that will pass the IP straight over to foreign students who will then take it home?
What has happened to UK development companies?
Universities no longer perform blue sky research. They are commercial entities that use government subsidies to outcompete other companies.
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#124 Guy Croft
If ours is a fringe view this is worse than I thought!
We had better shout more loadly then.
Crikey, I think you are right!
The nation has become culturaly blind, only capable of registering and responding to news that involves the words 'shopping' or fancy high finance words like credit default swaps' or 'home improvements' and the like.
Talk about the guy who has been sucessfully exporting advanced machine parts to China or bridge sections accross the world for decades and the screens come down, noboddy is interested.
Does anyone care that (for example) I heard Cleveland Bridge in Teesside is looking at supplying the massive steel sections to cover the decaying sarcophagus at Chernobyl?
Real stuff, real value, real engineering expertise and quite interesting too. That will never get on the news not on the BBC, but if Marks and Spenser opens a franchise in Malaysia it would be cause for national pride.
Wake up UK plc for goodness sake!
Dear moderator, if you have a soul please 'read' rather than 'check for compliance with the rules this submission' and others by Guy Croft and myself, point Robert Peston into reading them, rugby tackle him in the corridor if needs be.
Then maybe just then, he may do an article on the part of the economy that makes 'real stuff' and often succesfully too I might add.
Be warned he may need to inform his bosses that his viewing figures will take a hit if he doesant mention the high street or financial instruments or mortgages for a bit and he may need to get some grease under his fingernails if he goes on location.
Will you both rise to the challenge?
Jericoa
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A profitable company publishes results in line with expectations. Story?
The man from Next criticising the VAT cut...isn't that what everyone on here has done.
Just because Crash spouts he's "the saviour of the world" doesn't mean you don't have to check facts and ask questions.
It will be interesting to discover if the treasury is actually able to track what effect the VAT reduction is having month by month, and hence we should have December's figures by now (or are they still with the statistical office?)
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#126 raises the question of quality. Buy something good and the seller has a brand holder forever.
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Peston the eternal pessimist . I agree fully with comment with "ctaman" ref 214 .
And I thought it was only me !!
:-)
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This comment was removed because the moderators found it broke the House Rules.
220 prudeboy
The assessment was place with an independent body in that case a Uni because there was no inhouse knowhow in that area and the professor involved, now retired, was respected internationally and had the test rigs ready and waiting. there were no independent, note the word independent, commercial turnkey facilities identified. Test rigs are expensive beasts.
You are correct to say unis have probably drifted onto dubious ground driven by accountant instruction to get money in. For example Ford have or did have R and D placed with a uni, probably still do. However Ford would never let cutting edge stuff out so by definition it is probably not something a Uni really would seek to do academically, but they do it probably to get the money in.
There also has been a steady reduction in R and D facilities in this country. For example I was told rightly or wrongly a leading environmental R and D facility identified very early on that micro particulates in diesel emissions were dangerous pollutants to human respiration and behaved in a fluid manner in the air, ie did not settle out. This occurred around about the time it was decided diesel should be promoted. The facility I was told was doing the work was shut down at much the same time, all work on the area stopped as far as I am aware forthwith. We have an epidemic in asthma particularly in urban environments where vehicle exhausts are common. Diesel is now seen, decades later, as a problem.
I am going back some time with these comments (which I have tried to make clear), as I have said elsewhere I am doing something else now.
My experience with subcontract R and D was you only subcontracted if you didnt know the technology. However you had to learn the technology in order to manage the project so you were always better doing the work in house if possible. Particularly as you rapidly found that in fact the knowledge in the project R and D area was by definition new to some extent to the subcontractor and they were optomistic about their learning curve. I have seen a number of case where the parties involved simply could not demonstrate any comprehension of what they where suposed to be doing.
My experience of blue chip is very few blue chips are really that good, most are trading on historical acheivement. Most have been in the grip of accountants and funding problems for a long time. At least one national establishment has been seen as earmarked for a development site for a very long time.
A relative, no longer about, who was a financial director on the board of a UK based multinational group said he spent his whole career trying to kill off research programmes because the group never saw a return and spent multi millions. Shortsighted you can say but it is just a sign of what a difficult game R and D is in the UK.
In the US massive funding is available for R and D via NASA (stunning figures) and other government programmes and the results spin off in to commerce via freedom of information and subsequent personnel transfer with unpublished knowhow, because by definition not all gets published, just what is contracted.
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Robert:
Ok it's a line, and few column inches...
But hey... did you write this or have the office-boy copy and paste under your name?
This is the run of the mill story of business. It happens day in day out. It is not news... (or shouldn't be...)
Get a real story...
Investigative jungle material... Show us your future, not somebody else's past...
Be brave, be insightful... Be controversial - to a point...
Give us something to 'blog' about!
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There seems to be a resurrectionist movement going on with manufacturing, at least on this blog. Shame guys, I just wish there had been such enthusiasm over the successive sector collapses over the last 3 or 4 decades. But then there was the illusion of finance then, held up as the shining light. And still people only want imports. There is a cultural problem guys. Makes for a good museum though, there are some set up already, mining pits, blacksmiths and cobblers workshops, I'm not joking, fact. It always gives me amusement that lottery money is available to restore into working condition facilities that were in use fairly recently, and which were denied any financial support or break at the time. Good intent guys but out of step. Perhaps the best thing is the lottery route, seriously. Working museum, come and see somebody doing a proper job, like we used to guv, you know physically doing something. Or is my humour too black for you. In one design office the cleaner said to me one day - you are the guys who copy the stuff downstairs arnt you. They thought the product appeared from the gods, beamed down overnight, and that we then did drawings of it. It was beyond them that somebody designed it.
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Simon Wolfson said the public sector could be more efficient.
Funny that's just what Obama was saying today.
Wonder if GB was listening.
Cutting out waste in government spending is Obama's top priority.
Aiming to create 3 million new jobs in the PRIVATE sector.
Sounds like he doesn't have too much in common with GB already.
What he intends to do sounds more like conservative policy.
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In respect of the adverse remarks aimed at RP - his part in the economic downfall - as cited, I say good luck RP if his incisive reports bring about the downfall of this overbearing, ghastly, plodding and uninspired government.
And if that brings further disruption to the economy I say small price to pay at this time because whatever government comes later (I pray for a wartime-style coalition) will likely be no worse and may be better but will certainly -given the extreme circumstances that it will face - be more honest, thoughtful, sophisticated and sanguine.
I'd like to see a strong economy built on fact and material not fantasy, an economy that can build a future into 2050 not just 2010 so that the silent generation (present under 25s) can look forward to that future with confidence and not have to look back at the generation that took everything and left nothing.
BUT - I - for one - have NO wish whatever for the economy to 'pick up' under THIS regime either thanks to them or in spite of them. Do you? Or is your self interest so great that you want a return to the old days (normality?) at any price?
Not me. They led us into this mess and took no steps at all at the right times to prevent it. They never took large-scale constructive and elegant measures to protect ordinary people from what might happen. They bogged themselves down in petty legislation that no-one wanted far less respected, talked interminably about 'measures', 'pledges', 'plans', 'missons', visions', 'investments', 'growth', 'fairness' and everything under the sun - that all came to absolutely NOTHING. There isn't a single worthwhile large scale plan in place to stop the socio-economic wreckage in any field at all!
They couldn't even do anything useful during last year's floods even though Brown was 'working till midnight' on 'plans'. And if civil unrest breaks out because of the deprivation that people are facing there won't be a plan for that either, just a crackdown and no thought for why it might have happened or how it could have been prevented.
And they are all so easily diverted to 'issues' in other countries and how they like to strut the grand stage! One event outside the UK - eg: the Gaza conflict and suddenly - that's the new priority and it's cummon - 'all hands to the pump'. I imagine that one day Brown will say 'yes, we have to fix the UK economy but first we must sort out the Palestinian question..'
I just want them OUT! No way do I want to see them crowing about how they 'turned it around' considering, if nothing else, the trainwreck of personal and corporate debris they have created. I don't want this mob to have a shred of credit for any recovery. Such a thing, if it ever happens, will be OUR victory, because we carried on bravely in spite of the terrors around us.
Until they are gone, as far as I'm concerned, I'm working for my survival and no more than that. It is a long time since I considered that part of my role as a businessman was to contribute to the wellbeing of the UK as a whole.
Those continually sniping at RP - do you want to be part of New Labour's economic victory celebrations?
To hijack Gen Montogmery's words 'sorry Gordon, you've got to go, the men don't want to fight for you any more'. And yes, I was a soldier once so I know about leadership and missions and rules of war.
And when the Great Pretender finally, breathlessly scurries off back to where he came from RP can talk with pride about 'his part in that downfall'.
GC
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Soton Blogger's comment 2 sums up everything that is wrong right now. Capitalism depends on a constant and increasing "buy buy buy" to keep it functioning, slowing down would be a This system was only fuelled by easy credit, not caused by it. Now we are seeing what happens when that stops, and the collapse is only just beginning. GB is right in a way to want us to spend, but that's only delaying
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#228 - well said!
I blame the rise of the leisure and tourism degree courses! All those bright young things with those workable ideas 'put a fence round it and charge 7.50 a head to look at the old manufacturing works'..
Don't go to Ironbridge. What a hapless mess.
GC
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Soton Blogger's comment 2 sums up everything that is wrong right now. Capitalism depends on a constant and increasing "buy buy buy" to keep it functioning. The spendfest of the 20th and 21st Centuries was further fuelled by easy credit, not brought about by it. Now we are seeing what happens when the spendfest stops, and the collapse is only just beginning. The fact we've stopped spending is causing the collapse (nb Cameron), so GBrown is right in a way to want us to buy buy buy, but that policy only delays the disaster that's looming. Ooooer…
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How many staff will lose their jobs from outsourced companies? Many people work in call centres & offices around the country, doing work for M and S, but are emplyed by someone else - so how many of them are going to lose their jobs?
My comfort though is that I work on the website - one of the best performing sectors
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177-'It is time to stand up and be heard. It is time for the British public to march in MILLIONS in every major city throughout the land and insist that BROWN be REMOVED from office.'
These are the sentiments that I have felt since this financial crisis began many months ago. The entire mess has occured on Browns watch, both as chancellor, and now as PM. He should go.
We have been given the chance to show our lack of confidence in Brown by signing the petition. http://petitions.number10.gov.uk/Finance/
Since 4th Jan only 808 names have been added to the list. Does that show how apathetic we have become, or more worryingly, do most people consider that he is doing a good job?
The thought of this government being returned to office in the next year or two fills me with despair. The line 'suicide is painless, it brings on many changes' is very apt when considering another term with Brown and his dithering crew.
We have until 15th Jan, sign the petition now !!
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As Mr Peston rightly said in a piece on BBC news, we are now at the end of a spending boom. So put simply the extrordinary spending that has occured over the last few years fuelled by rising house prices and easy credit has ended. The next phase is that we head into a corrective recession.
I agree with sisterkaff (233) therefore that the cure proposed by Mr Brown is only delaying the inevitable - how can you spend your way out of a recession caused by overspending? The Labour prosperity machine has turned and bitten them on the ass so to speak. Then as has been voiced elsewhere in this discussion, there is little else comming along to restore the economy in the medium term.
Also we need to be mindful that in a recession, those jobs lost are usually replaced with lower paid positions thus reducing the amount of disposable income available, thus further reducing business incomes.
As for the validity of Mr Browns position as Prime Minister, I said it before on here, he was not elected to the post, nobody stood against him and therefore his appointment seems nothing more than a long service award. He was the architect of our current financial position having been chancellor for many years so cannot claim the usual 'I know nothing' retort.
A final note - isn't it interesting that in the good boom times, the labour party was fully responsible and took credit, in recession, it is a global problem and 'nothing to do with us' - count how many times each labour politician sites 'global downturn' each time they are interviewed!
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In trying to anticipate where this current recession my end is open to alot of speculation by alot of so called 'experts' , i.e. the same type of experts (Solicitors, Accountants, Economists and Bankers etc.) that fell for the "Madoff" scam ? Consequently for its its worth I woulld like add my own scanario based on historical records of property prices produced (June 08) by the Nationwide Building Society for the past 33 years.
Looking back on the last two recessions in the early eighties and early ninties the time taken from peak to trough took 7 years and 9 years repectively. On this basis, assuming the peak occured around August 2007, the pending "bottom of the trough" should occour somewhere around 2014 - I believe that were it not for the developing Eastern Money markets this recession was 3/5 years overdue. Meanwhile the actual property prices, historically, have dropped roughly 50% to 60% each time from their peak. According to the latest reports from Nationwide and Halifax the drop in house prices for the year is around 16% - combined with the previous year drop brings the current total drop to around 30% already - getting closer to the 50/60% predictions above.
According to most of the press and financial 'Gurus' ( and yourself included ?) the current down turn is predicted to last only another 12 to 18 months ?
Do you ( Robert Peston) still believe this to be the case ? or am I missing something and being too simplistic ?
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Simon Wolfsons was only stating the bleeding obvious when rubbishing the reduction of VAT.
He may be a Conservative supporter, but this does not effect him as a retail leader and in hearing his interview he gave not one whit of overt political bias, as is normal on the bbc.
He spoke nothing but truth - a truth this government has not the balls or common sense to realise.
If the bbc and Robert Peston wish to make political capital out of their statements then it should also issue a health warning on all its viewpoints.
ie. "Robert Peston is the son of a NuLabor peer", and perhaps a codicil to state this does not affect his balance and judgement, and in fact he is a ???????.
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