View from City Road: The long term can be a long time a-coming

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Sunday bloody Sunday, as they like to grumble in the Home Office. Officials there have been grappling for years with the controversial issue of what to do about our anachronistic and absurd Sunday trading rules. Today's report* commissioned from London Economics gives helpful pointers to the economic consequences of the various proposals. The consultants, being economists, examine the short run and then the long run. And, being economists, they predict that the long-term effects will be the precise opposite of the short-term effects. (Students of the dismal science may recall the dreaded J-curve.)

Thus, tightening up on Sunday trading would initially reduce costs, as retailers save on Sunday wages, lighting and other variable expenses. And profits would increase. But gradually new stores would be opened to compensate for the lost trading opportunity. This would push up costs and prices. Employment would go up; but wages would fall, as staff forego the premium of Sunday working.

Or take the opposite extreme - full deregulation. At first, costs go up as stores opening on the seventh day pay premium wages. Profits fall. But in the long run, the least efficient shops go bust, reducing employment. That means more business for the efficient survivors, allowing prices to fall and wages (for those still with jobs) to rise.

Both deregulation and partial deregulation eventually produce more benefits to the consumer: greater convenience, lower prices and less weekday congestion. Restricting Sunday opening creates more jobs, albeit with lower wages. It also helps to preserve the unique nature of the Sabbath.

Supporters of deregulation still have to convince Parliament that the increased efficiency generated by seven-day trading will be passed on to the consumer, not swallowed up in higher margins. They also have to show that the long term eventually arrives - something Keynes rather doubted.

In the jungle of economic theory, inefficient firms die quickly - to the benefit of the surviving majority. On the high street, different rules apply. That is why Gateway is still alive and kicking, and why every other store seems to be an unwanted shoe-shop or jeweller.

* The Economic Impact of Alternative Sunday Trading Regulations, London Economics, 91 New Cavendish Street, London W1M 7FS. 071-273 4640.