The fiscal policy of a new government is the key event in the coming year, says Clive Black
The new year for UK food retailers and their suppliers has commenced with some price shouting from the superstore groups. As Justin King put it: 'It's January, there must be a price war.'
However, we concur with Mr King's irony. We don't agree with the headline writers' view that there is a constant price war, and think 2010 has commenced, from a trading perspective, in line with our expectations. The normal pattern of January trade is price shouting but no price war, a little cash conservation by the customer after Christmas expenditure and an attempt to ease off on the calories and booze. This year is no exception to our minds.
Our expectation that the food superstores would have a pretty good Christmas in 2009 also seems to have come to pass. So with the commencement of the year going to form, what is the one big issue for the industry in 2010?Well, while industry-specific matters will of course impact the development and performance of the grocery sector, we believe the UK General Election, which has to take place by the first week of June and, more to the point, the fiscal and budgetary policy thereafter, are the key events for business leaders to watch.
International investors, key to servicing Britain's deficits, will also be keeping a close eye on the new British government's first Budget. If they do not believe that the political class is serious about dealing with the widely appreciated deficits, then we assert that the more fundamental laws of economics will come into play and so currency markets will do it for them. Accordingly, until the election in May/June there is likely to be lots of hot air until reality kicks in thereafter.
From the Budget much else follows the fiscal take, currency movements, inflation predictions and interest rate policy to name but four. For consumer goods and retail companies keenly interested in the relative terms of trade for their costs of goods, as well as household expenditure and consumer confidence on the demand side of their business models, the ability of the next government to deliver a stable outcome will be more than a passing interest, albeit one that they are pretty much unable to influence.
Frankly, from this big event all other components of the business model can be expected to fall into place or otherwise. Hold on tight, it could yet be a ride with a few steep inclines but also rapid falls.
Clive Black is head of research at Shore Capital Stockbrokers.
More opinion
The new year for UK food retailers and their suppliers has commenced with some price shouting from the superstore groups. As Justin King put it: 'It's January, there must be a price war.'
However, we concur with Mr King's irony. We don't agree with the headline writers' view that there is a constant price war, and think 2010 has commenced, from a trading perspective, in line with our expectations. The normal pattern of January trade is price shouting but no price war, a little cash conservation by the customer after Christmas expenditure and an attempt to ease off on the calories and booze. This year is no exception to our minds.
Our expectation that the food superstores would have a pretty good Christmas in 2009 also seems to have come to pass. So with the commencement of the year going to form, what is the one big issue for the industry in 2010?Well, while industry-specific matters will of course impact the development and performance of the grocery sector, we believe the UK General Election, which has to take place by the first week of June and, more to the point, the fiscal and budgetary policy thereafter, are the key events for business leaders to watch.
International investors, key to servicing Britain's deficits, will also be keeping a close eye on the new British government's first Budget. If they do not believe that the political class is serious about dealing with the widely appreciated deficits, then we assert that the more fundamental laws of economics will come into play and so currency markets will do it for them. Accordingly, until the election in May/June there is likely to be lots of hot air until reality kicks in thereafter.
From the Budget much else follows the fiscal take, currency movements, inflation predictions and interest rate policy to name but four. For consumer goods and retail companies keenly interested in the relative terms of trade for their costs of goods, as well as household expenditure and consumer confidence on the demand side of their business models, the ability of the next government to deliver a stable outcome will be more than a passing interest, albeit one that they are pretty much unable to influence.
Frankly, from this big event all other components of the business model can be expected to fall into place or otherwise. Hold on tight, it could yet be a ride with a few steep inclines but also rapid falls.
Clive Black is head of research at Shore Capital Stockbrokers.
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