Jeremy Warner's Outlook: Tesco hegemony means grim picture for rest

Better regulation - Bernie Ebbers
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The Independent Online

To listen to what retailers are saying, it's amazing there haven't been more profit warnings. There's only been one since Christmas so far, which was from Boots. If talk in the industry is to be believed, even now analysts are being far too optimistic in their forecasts for the high street chemist. There's going to have to be a lot more massaging down of profit expectations before they match the reality.

To listen to what retailers are saying, it's amazing there haven't been more profit warnings. There's only been one since Christmas so far, which was from Boots. If talk in the industry is to be believed, even now analysts are being far too optimistic in their forecasts for the high street chemist. There's going to have to be a lot more massaging down of profit expectations before they match the reality.

Boots has particular problems, but the situation looks grim across the high street. Gloom predominates. The crocuses may be pushing their way through the frozen soil, yet there's little sign of spring on the high street, where the warm sunny days likely to bring the shoppers out to play have been almost entirely absent so far this year.

The fear is that it's not just the weather; it's also the slowing housing market, and the prospect of higher taxes and interest rates after the election. It only requires a small decrease in discretionary spending by each individual to make a big difference to the retailer's tills. Strange but true, men's shoes is where the belt tightening is felt most acutely. In any economy drive, the breadwinner's new pair of shoes is the first victim.

We get some idea of what's going on from John Lewis, the department stores group which, because it isn't publicly quoted, publishes weekly sales figures. In last five weeks, overall sales were down 1.4 per cent. Yet in womenswear, John Lewis is down 3.4 per cent, and at the company's flagship Oxford Street store, there has been a 7 per cent slump in sales.

Annual profit figures next week from Next ought to give a broader picture of what's been happening in the publicly quoted sector. Again there is talk of big disappointments to come. Likewise at Marks & Spencer, which reports in mid-April. The profits guidance for last year of £600m to £625m will be met, but on present indications, the stomach churning fall in sales that occurred in the third quarter may well have been extend into the fourth. Stuart Rose, the chief executive, will have to work even harder at his costs to keep them shrinking as fast as his sales.

Yet it is not all down to the economy. There is one retailer, Tesco, which by most accounts is continuing to buck the trend, having enjoyed another sensational leap in sales for the week just past. Food sales are in any case relatively unaffected by the ups and downs of the economy. Indeed there is some evidence to suggest supermarket sales might even benefit from slowdowns as people swap from going out to staying at home. Yet it is in non-food sales where the turbo-charged progress is being achieved.

For the legacy retailers of the high street, there is no obvious answer to the growing buying power of the Tesco juggernaut, or the sheer convenience of its shopping experience, which is the British equivalent of the American shopping mall. It's tough enough out there. Tesco is making a grim situation grimmer still.

Better regulation

I have been taken to task by a reader for rhetorically asking in this column last week why bees should have their own regulator but not ants. The answer, I'm instructed, is that like any other species, bees are prone to disease, much of it imported from foreign climes, and because of the vital role they play in the nation's agriculture through pollination, not to mention the wonderful honey they produce, their health therefore requires special rules and protections. Ants, on the other hand, play no such role and in any case are not so disease prone. So now I know.

No disrespect to bees, but the point was whether it was really necessary to have a separate bee health authority, with its own budget, for matters that could presumably be dealt with perfectly adequately through pre-existing mechanisms for agricultural disease control. The choice of bees was perhaps an unfortunate one, for there are many less deserving cases for bureaucratic meddling that also have there own authority which could equally well be cited.

Every problem, it seems, spawns its own regulator, even down to the discovery of a new form of fungus in the hive. The recommendations of two separate reviews on regulation are to be published today to coincide with the Budget, and just in case you were wondering why it is necessary to have two reviews when one would presumably have sufficed, the answer, apart from bureaucratic penchant for duplication, is that one was commissioned by the Prime Minister while the other was commissioned by the Chancellor. Even in addressing red tape, the two seem quite incapable of co-operating.

With a bit of luck, the two sets of recommendations might none the less come to be seen as complementary. The Better Regulation Task Force under David Arculus, chairman of O 2, puts the prize at a potential £16bn, worth about 1 per cent on GDP. According to Mr Arculus, this could be achieved through the relatively painless adoption of the Dutch approach to reducing the administrative costs imposed on business, and through the application of the "One in, One out" principle, in which government is forced to prioritise its regulatory goals by dropping one set of regulations for each new one it introduces.

Rather depressingly, the Dutch approach requires yet more committees, reviews and monitoring processes, so you have to wonder whether the flames of Dutch endeavour will not end up going the same way as all such previous bonfires of red tape - dowsed by the heavy hand of bureaucracy. Still, on the face of it, the approach seems sensible and certainly well worth a go.

The idea is first to find a common method of measuring the cost of regulation that can be applied across departments and branches of government, then to set a target, of say 25 per cent, again universally applied, for reducing these costs. The process obviously requires careful monitoring to ensure that targets are met. In the private sector, targets are met by promising monetary reward. There is no obvious answer to how this system of incentives might be replicated in the public sector, as no one would willingly deregulate themselves out of a job.

The Chancellor's review - under Philip Hampton, chairman of J Sainsbury - recommends a more straightforward approach, which would be to bring the proliferation of regulators to an end by culling and merging them. Duplication would be eradicated, and administrative costs thereby reduced.

It's easy to be cynical. The cliches pour from Mr Arculus's lips rather in the way they did from Michael Heseltine's more than 10 years ago with his "bonfire of red tape". Predictably, it was always too damp to light. Instead of a bonfire, Mr Arculus promises a "revolution. He's looking for "outcome, not admin", and for "prosperity, not paperwork". Yet somehow or other the admin and paperwork just keeps on growing.

Mr Brown will again make improving Britain's lamentable record on productivity growth a corner piece of his rhetoric in today's Budget, as he needs to with China and India breathing down our necks. Yet he must first address the mote in his own eye. In eight years of government, Labour has tied business up in ever more tightly in layers of red tape, while the Chancellor himself has transferred an enormous weight of administrative cost on to business for his various social initiatives, from stakeholder pensions to tax credits. We can only hope that this time,the practice matches the rhetoric. A "Better Regulation Executive" to monitor the burden of regulation? Sounds like just another regulator to me.

Bernie Ebbers

From the moment the larger than life former basketball coach, Bernie Ebbers, bounced on to the world business stage, you kind of sensed he was trouble. Sir Peter Bonfield, former chief executive of British Telecom, sensed it too, and when he was outbid by Ebbers for the American long-distance carrier, MCI, he insisted on cash for his 20 per cent stake rather than the candy floss paper Ebbers wanted him to take. It was the best deal Sir Peter ever did, though he got little thanks for it when he too was unceremoniously ousted for unrelated acts of mis-management. Ebbers was a fraud. Despite the hype and madness of the times, Sir Peter instinctively recognised it.

jeremy.warner@independent.co.uk

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