THE December retail figures show that Santa gave the British high street a miss at Christmas.
UK sales volumes fell during the month. There was a modest annual rise in 2012 of 0.3 per cent, but that’s well below forecasts and further proof (on top of falling service orders) that the economy probably went into reverse in the fourth quarter.
The biggest sales drop was in the household goods sector. This indicates that declining real incomes and higher taxes are forcing consumers to pull up the drawbridge. That bodes ill given that consumer spending fuels two thirds of gross domestic product (GDP).
There’s an optimistic alternative to this picture of doom and gloom, put forward by, among others, my old comrade in arms, Bill Jamieson. Bill detects a wave of innovation and SME formation bubbling up like the early buds in my garden. In this scenario, the current implosion of high street retails such as HMV and Blockbusters has more to do with obsolete business models than secular economic decline.
Certainly, the steady climb in global stock markets suggests investors are not ready to write off growth in 2013. And the financial markets seem to have quelled their doubts about the eurozone – though I detect a slight upward drift in peripheral bond yields this week.
However, it still seems to me that if UK consumers won’t – or can’t – spend, then there is nothing to drive the British economy back to growth. QED. Worse, a dip back into recession could trigger the loss of Britain’s triple-A sovereign credit rating.
True, the US suffered this indignity and lived to tell the tale. But doubts regarding the UK economy have prompted a steady fall in the value of sterling throughout 2012. This could turn into a sterling rout if the UK is downgraded.
That may sound good for exports but it will bump up inflation and crucify already hard-pressed consumers. Time to cut VAT?
Future in EU depends on how you look at it
BUSINESSES in Scotland are growing more sceptical about European membership, says a new poll from Close Brothers Asset Finance. This claims that a third of Scottish SME owner-managers want Britain to quit the EU. On the other hand, that means two thirds want to stay in.
I’m not sure that one-person SMEs are a good guide to overall Scottish business opinion regarding the EU. Larger companies, particularly those with an export business, clearly value access to the single market. Besides, the Scottish electorate as a whole is more pro-EU than the rest of Britain.
A recent YouGov poll showed 50 per cent of Scots want to stay in and 50 per cent want to leave. In contrast, 60 per cent of English respondents want out. If Britain and/or Scotland left the EU, I doubt if there would be a willingness on either side to give up free trade links. However, foreign investment flows into Scotland could be adversely affected.
In 2011 – the latest figures available – Scotland topped the UK for jobs created by foreign direct investment (FDI). The biggest source of foreign investment came from the US. Would American FDI still pour into Scotland if we were outside the EU?
Beginners’ guide to the hostile takeover
ON Thursday, I was at the opening of the fabulous Viking exhibition at the National Museum of Scotland.
On sale in the exhibition shop: The Vikings’ Guide to Good Business.