Enjoy the brief honeymoon period until the election is out of the way and we will be told how much worse finances are than we all thought
In the dark days of autumn 2008 I advised several retailers to budget for about a 5% decline in like-for-like retail sales for 2009.
In the event, last year produced growth of almost 2%, not far off the average for the noughties - a decade that will be viewed historically as a golden age of excessive unsustainable personal consumption fuelled by debt.
So how did I get it so wrong? Since any pundit is only as good as their last forecast it is no comfort everyone else got it wrong too. Now, with everyone again forecasting tough times, it is tempting to make an optimistic forecast for 2010 as those proverbial green shoots of recovery become stronger and more evident.
Sadly I can’t do it. We are entering what will come to be characterised as ‘the joyless recovery’, as the politicians delight us with hair-shirt policies promising financial rectitude.
Enjoy the brief honeymoon period until the election is out of the way, when the new government will lift the curtain on the traditional pantomime act and we will be told how much worse the government’s finances are than we had already all thought.
What happened last year was perhaps the first ‘virtual’ recession, where the reality for most people was they became better off. Like King Canute the politicians flexed their muscles, determined to demonstrate that they had the power to hold back the tide of recession.
In the process, factors such as low interest rates and the VAT reduction provided immediate relief, and for above average income earners with large mortgages the relief was substantial.
However, none of this did anything beyond putting sticking plaster over the fundamental problems and the hundreds of billions spent rescuing the banks and propping up the economy has to be repaid. There are no prizes for guessing who will foot the bill.
The consequence has to be several years at least of no real growth in retail sales as the cumulative effects of tax rises, cuts in public spending and a return to ‘normal’ interest rates permeates the economy. In this joyless, austere period to come, growth must be derived not from the market but by offering customers something better than the competition.
Your destiny is in your own hands - it is the media that perpetuates the myth that business failures are a direct result of the recession.
The economy may determine the timing but retail failures are a consequence of ineffective management, short-sighted greedy bankers and fundamental long-term changes in the market.
Woolworths was a classic example. How could the management and the banks have believed that a debt package secured on its stock was a sensible financing mechanism for a company whose major product category, entertainment, was under serious attack and whose cost base was undermined by an inflation-proofed rental basis?
Whether Woolworths’ demise was historic inevitability is an issue I will return to in the future.