These are interesting times for the British consumer.
Sainsbury’s chief executive Mike Coupe stated that the British were behaving as if they were in the midst of a recession. Yet consumers are living in a period with economic conditions most chancellors of the exchequer would die for.
The UK has virtually full employment, despite the dystopian forecasts of ridiculously biased establishment/remainer economists; most employers struggle to find the talent they need to progress. Unemployment is at more than a 40-year low with a record-high workforce. That labour market is pushing up wage awards, which are growing ahead of the Consumer Price Index, raising living standards.
Following the EU referendum, shoppers remained stoic. That robust behaviour was sustained through to last autumn. But what emerged from the summer break was a sad political circus at Westminster, one the public has watched with disbelief, incredulity, frustration and now simmering anger, with most MPs quite simply disappearing up their own backsides and most certainly not acting in the national interest.
The key hope is that there is progress and so clarity on the future political relationship with Europe and the wider world. The British have been stoic since the referendum and Theresa May’s disastrous election. However, consumers and entrepreneurs alike now despair at the political class, which is serving anything but the national interest, and this is starting to have a negative impact on the real economy, including retail property values. Deal or no deal, the UK will probably adapt and be fine in due course. It is the current political paralysis and associated uncertainty that is an economic cancer. Accordingly, the exit from the EU date may be kicked down the road as politicians and officials pontificate and citizens simmer.
Resolution: To put on weight, increase my alcohol consumption to at least the legally recommended limit, see what is supposed to be so special about casual drug consumption, maybe allowing me to try much harder concoctions in due course, and reduce my physical activities down to levels that do not annoy the quite-average sporting folks around me.
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Correspondingly, the British reined in their spending, despite more pennies in their purses. Such behaviour took experienced retailers into territory they’d never seen before; November was a total disaster for the majority of Britain’s high streets and shopping centres, contributing to online penetration for non-food of over 30% for the first time; that is nearly one in three non-food units purchased over the web.
So the vast majority of major store-based retailers, including grocers, were behind budget going into December and while Christmas 2018 was not a total car crash for shopkeepers, it was a poor one.
Will the British consumer revert to that very cautious November behaviour as the UK-EU political machinations pan out this year? Who knows what will happen, but these are worrying times… votes of no confidence, a potential second referendum, a possible general election, kicking the Brexit can down the road.
All such options imply greater uncertainty and caution. While all this pans out, weaker retail players are more likely than not to be sunk by inactive shoppers, adding to the list of administrations, particularly as Q1 ends, plus associated CVAs, rising voids and accompanying retail real estate asset writedowns.
Britain needs certainty; clarity as to the modus operandi with the EU and wider world. Politicians, of virtually every hue, should hold their heads in shame. They are making the UK a national and international embarrassment: not just May, not just Corbyn, not just Foster, Soubry or Rees-Mogg, but all of them.
Clutching defeat from the jaws of victory is a kind phrase to characterise the country’s view of the members of the House of Commons. The sooner common sense prevails the better for all those outside this goldfish bowl full of political lunatics.
Clive Black is head of research at Shore Capital Markets
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