Jeremy Warner's Outlook: Dixons' John Clare sees a silver lining in grim Christmas trading: squeezing the opposition

LSE: expensive meat for the barbie; Older workers: Don't knock them
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What? No festive rate cut? If you hadn't got the message after last week's Inflation Report, it was rammed home loud and clear in minutes published yesterday to the last meeting of the Bank of England's Monetary Policy Committee. Contrary to City speculation that at least one or two members of the MPC might have voted for a cut, the Committee was in fact unanimous in leaving rates on hold.

Nor was there any serious discussion of the need for a cut, despite the deafening screams of pain emanating from the high street. The cold snap may have helped matters a little in that regard, but even so, the latest survey of retail trends at Christmas by Deloittes suggests a pretty miserable Yuletide for retailers. The MPC seemed not to care. Rather it chose to highlight the risk of second-round inflationary effects from rising energy prices, though there are as yet no signs of these in the form of higher inflationary expectations.

The upshot is that to the consternation of John Clare, chief executive of Dixons, and other beleaguered high street retailers, the Bank of England remains firmly in wait and see mode. In the absence of a total collapse in consumer confidence, it is unlikely to be cutting rates any time soon.

For Dixons, or DSG International as we must now learn to call the electricals retailer, the squeeze on expenditure could scarcely have come at a worse time as the company struggles with seemingly intractable structural challenges. Like-for-like sales in the 28 weeks to 12 November were down 3 per cent, with sales at The Link mobile phones chain down 28 per cent and 8 per cent at PC World. Sales of fridges and washing machines have suffered with the slowdown in the housing market, while across the board, Dixons is having to sprint to keep up with the twin challenges of rampant price deflation and fast growing online competition.

In these circumstances, it is a tribute to Mr Clare's management skills that he has succeeded in keeping costs falling as fast as sales, thus maintaining his margins and his ability to pay a sector-busting dividend.

With no sign of an improvement in retail conditions, and little sign of the Bank of England coming to his rescue, cost control and working capital management must remain Mr Clare's key priorities.

It's depressing stuff, but in every cloud there is a silver lining and, optimist that he is, Mr Clare is determined to see opportunity in the present gloom. Indeed, he is positively relishing the likely dire Christmas trading conditions, for they provide a fresh chance to squeeze out weaker rivals and further entrench his market leading position.

LSE: expensive meat for the barbie

Is the Australian investment bank Macquarie just talking its book, or is it serious in suggesting it might walk given what it describes as the London Stock Exchange's "increasingly challenging" valuation?

One thing seems clear. Macquarie is the only credible bidder still left in contention, and that gives it a stronger hand than the City perhaps appreciates. Deutsche Börse was out of the game long ago, though bizarrely it pursued the competition inquiry to the bitter end.

Euronext too is struggling to come up with anything its own shareholders would find acceptable, and like Deutsche Börse is required by the competition authorities to give away value even to get to the starting post. If it had been deemed a credible bidder, Euronext would have been ordered by the City Takeover Panel to put up or shut up alongside Macquarie. That it wasn't speaks volumes.

As the only girl left on the dance floor, Macquarie can name its own price, knowing that LSE shares would collapse if it were to withdraw. Even so, I don't rate the Aussies' chances. The involvement of Goldman Sachs in the Macquarie consortium is still a major problem for many stock exchange users, as too is the whole concept of a highly leveraged bid for what remains a utility business.

Macquarie is a clever bank that makes a lot of money, but there's no particular magic in its approach. The secret is just making the assets sweat. With the LSE it threatens to descend like a biblical plague of locusts. After stripping the landscape clean of vegetation it will move on. It cannot be good for LSE users, and it cannot be good for London as a financial sector, to have the main share trading platform run aggressively for cash. The only thing Macquarie is good for is the share price, and even on this front there are growing doubts about its intentions.

Older workers: Don't knock them

It will cost industry more than £4bn a year to have the state pension age raised to 67, according to "research" published by the Cass Business School ahead of next week's Pensions Commission report. Raising the retirement age is expected to be a key recommendation of the report, the idea being that the nation would find it easier to finance a more generous basic state pension if the age of entitlement were increased.

The Government would save about £8bn a year by increasing the age to 67, yet according to the Cass Business School, the effect would be only to shift the costs on to industry. This is because older workers take more time off in illness and are generally less productive, claims Cass Business School, citing other "research" which finds that the optimum age for worker productivity is between 35 and 49.

An awful lot of older workers would take issue with this contention. In my own limited experience of these things, younger workers are more likely to take "sickies" and generally misbehave than older ones. It may have escaped Cass's notice but, what's more, people don't tend to take maternity and paternity leave in their late 60s.

None the less, Cass may be broadly right in asserting that on average, productivity declines with age, if only because older people are more prone to chronic illness, involving long periods of time off work, than younger ones.

The point Cass seems to be missing, however, is that for most businesses, excluding older workers is not going to be a matter of choice even if it were to be allowed. As the population ages, there will need to be greater participation in the workforce by older people whether business likes it or not. Growing competition for scarce younger workers would otherwise cause wages to sky rocket, with serious consequences for both inflation and growth.

The point at issue is rather whether older workers should enjoy the same employment protections as younger ones. Logic dictates that they should if they are not to be entitled to the state pension until the age of 67. Otherwise, it would be easy for employers to sack them or pay them next to nothing.

The contrary argument is that if older workers were protected, then employers would be less inclined to employ them, leading to a glut of unemployed elderly. As things stand, people are perfectly entitled to work after the age of 65 but enjoy no protections. This arguably creates many more employment opportunities for older workers than would exist otherwise.

The same hire and fire principles are used throughout the workforce in the US and many developing countries. The system may be brutal, but it can also be highly effective, for it should mean that the best guy for the available position gets the job whatever their age, race or demeanour. Nobody gets or retains a job as of right. If there's a 70 year old who can do it better, it's move over chum and let him have a go. Everyone finds their own level and the job gets done.

Rather than extend employment protections to older workers, it might be an idea to reduce them for younger ones. Perhaps regrettably, this is not something likely to get much air time with New Labour, or even the New caring, sharing Conservative Party. Hey ho.

j.warner@independent.co.uk

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