The pandemic is throwing up the unexpected when it comes to the economy. Ben Broadbent notes that 2020 may be the weakest year on record for UK output
The pandemic is throwing up the unexpected when it comes to the economy. Ben Broadbent notes that 2020 may be the weakest year on record for UK output but unexpectedly ‘retail spending growth is the strongest.’
The Bank of England’s deputy governor also makes the point that we should not get too fussed about the idea of ‘double-dip recession’ when we see the data for the current first quarter of 2021 because everything about the behaviour of the economy is ‘highly unusual’.
Charts showing strong retail spending run contrary to the narrative of last year.
Fashion and homewares star Next, sneakers and leisurewear chain JD Sports and beauty and protein retailer The Hut Group have done splendidly, says Alex Brummer
There have been endless headlines about carnage on the high street with famous names such as Debenhams, Arcadia-owned Topshop and Burtons, and Edinburgh Woollen Mills-owned Peacocks and Jaeger (which has now resettled at M&S) among the prominent casualties.
Locked-down, shuttered and derelict high streets are the cliche of our time. But for every outlet which has suffered there are others which have boomed. Supermarkets previously engaged in a race to the bottom with German interlopers Lidl and Aldi have grown sales at previously undreamed-of rates.
Anglo-French DIY and trades retailer Kingfisher grew fourth-quarter, same-store sales 12.5 per cent with a 20 per cent sprint in December. Online sales at the B&Q and Screwfix owner in the six weeks to January 9 rose 150 per cent. Profits of £667 million to £742 million are forecast for the full year and business rates relief and furlough cash handed back. It is not just DIY.
Fashion and homewares star Next, sneakers and leisurewear chain JD Sports and beauty and protein retailer The Hut Group have done splendidly. And, doubtless, Amazon is having a field day if my own shopping is typical. Enriching Jeff Bezos, whose company pays negligible UK taxes, is galling but the group’s logistics and online payment simplicity is second to none.
If retail is doing so well, how is it that another Bank of England guru, Andy Haldane, predicts a £100 billion hoard of savings, stored up in the Covid era, is set for release when the horror show is under control?
There is a muddle over the way that people assume consumer spending and shopping are one and the same. Consumer spending is much bigger, embracing holidays, concerts and theatre, eating and drinking out, gyms and all the rest. Much of that has halted with airlines such as Ryanair scaling back and (hopefully) issuing refunds.
This, while the furlough scheme continues to put a floor under the incomes of millions. The dawn after the darkest hour, as Bank of England Governor Andrew Bailey has put it, will come when the vaccine has gained enough traction for the economy to be brought out of hibernation.
That should see the wall of savings breached and investment restored. What was learned in 2020 is that when recession is induced by the overriding issues of public wellbeing, usual rules do not apply.
Tory Business Secretary Kwasi Kwarteng
As the fourth Tory Business Secretary in as many years, Kwasi Kwarteng (successor to Alok Sharma, Andrea Leadsom and Greg Clark) is choosing to take a stand on one of the most important issues of our time: the loss of confidence in audit.
Kwarteng’s timing is good. It comes as one of the greatest audit failures of recent times – Deloitte’s sloppy accounting at tech firm Autonomy – could potentially leave a UK executive Mike Lynch rotting in an American prison. Recent foul-ups include the Co-op Bank, Tesco, Carillion, Patisserie Valerie and Wirecard in Germany, to name a few. There has been a wheelbarrow of reports by John Kingman, the Competition & Markets Authority, and former London Stock Exchange chairman Donald Brydon. If Kwarteng can drag all of this from the Whitehall swamp it will be an excellent start.
It is hard to verify the claim by Checkout to be the world’s fourth largest fintech enterprise given the scale of Ant Financial, Worldpay, Klarna (one of Checkout’s customers), Apple Pay et al.
Nevertheless, the meaty £11 billion-plus valuation placed on the UK-founded and cloud based payments system for firms, ranging from Pizza Hut to H&M, is impressive. Another sign that the City has much to offer outside the EU.