While grocery is still holding up – people still have to eat after all – Asda’s Andy Bond warned this week that the first quarter next year would be much worse than Christmas.
Bond believes – and he’s probably right – that shoppers will find money to spend at Christmas, albeit only purchasing things they think are necessary. But next year they will have spent up and the economy won’t have shown any massive signs of improvement, so consumers will undoubtedly keep their purses shut.
The reality of this situation means, more than ever, that the Government needs to listen to retailers. Bond this week joined Retail Week’s Rate Rage campaign to cut the increases in business rates in 2009 and 2010. The timing and method of increases is irrational, Bond says, and the Government needs to take note of the businesses such as Asda, which speak directly to consumers.
Bond joins rival grocers Tesco and Sainsbury’s in Retail Week’s Rate Rage campaign. Tesco’s Terry Leahy pointed out that the Government was brave in slashing interest rates by 1.5 per cent but that there is more that needs to be done.
And in this tough climate, Leahy is right. Grocers may not be bearing the brunt of consumers tightening their purse strings, but they are hardly thriving either. Next year will get a lot tougher and in the same way that shoppers are worrying about their own mortgages or gas bills going up, retailers too are worrying about the costs they can’t control.
Business rates are out of kilter with the modern world. As Leahy points out, the modern economy is based on computers, mobile phone masts and ATMs – none of which are rateable. It doesn’t make sense therefore for a major tax rate based on property.
The grocers are united in their stance against the massive hikes in business rates. They are all cutting costs in their businesses to try and not pass on food inflation to consumers but they can only do so much. If their costs continue to escalate and the economic climate does not get any rosier then there is a risk of more job losses in retail. The Government should sit up and take notice before it gets too late.
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