It’s such a disappointment for the gloomsters. The plunge in sterling after the June vote was going to produce a surge tide of inflation to overwhelm static pay packets. Shoppers would be reduced to window-shoppers, and even though we never believed George Osborne’s silly pre-referendum scare stories, a bleak midwinter loomed for the high street.
It hasn’t turned out that way. The major retailers are reporting a decent Christmas, and the supermarkets seem finally have come to terms with the upstart invaders. Even Marks & Spencer appears (not for the first time) to have stopped the rot. The nearest thing to a shock this week was John Lewis warning that this year’s bonus for employees will be lower than last year’s. Sales are not the same as profits, but the tone is everywhere upbeat.
In short, something has gone unexpectedly right on the high street. It’s certainly not inflation, the food retailer’s friend, since prices are barely changed. Tesco cannot make much from selling champagne at £8 a bottle, but the falling pound was supposed to make imports dearer, not cheaper.
The pessimists are reduced to repeating “just you wait”, but each month the inflationary surge fails to arrive makes it weaker when, or if, it finally does. The shopkeepers’ failure to follow the script shows that supply chains can always be improved, and that raising prices in a competitive environment is hard.
Premier Foods, purveyors of Oxo cubes, Ambrosia creamed rice and profit warnings, is trying, demanding “mid-single-digit” price rises. Perhaps we are prepared to pay more for Mr Kipling’s cakes, but Premier is risking a Marmite moment in a market that is transparent, competitive and highly resistant to price rises. Expect more of an inflationary dribble, then, than a surge.
The £1.3bn swimming pool
.You can tell that a project is in trouble when its proponents are reduced to statistical drivel, such as “it will cost the equivalent of a pint of milk a year.” Who could object to the Swansea tidal project at that price? And it’s a lovely lagoon, full of happy splashing holidaymakers as well? Why, let’s get on building it right away!
It was probably too much to expect an injection of reality into this £1.3bn fantasy scheme from Charles Hendry’s report, given his record at the now-defunct Department of Energy. Ominously, he views the lagoon as merely a prototype for even grander barriers all over the coast. Prototypes are expensive, of course, in this case needing bigger subsidies, and for longer, than even the dreaded Hinkley Point nuclear power station.
Be reasonable, argues Mr Hendry. It’s only subsidised for the first 60 years. For the following 60 the power would be “subsidy free”, the justification for his silly pint-of-milk sums, and long before then Britain would be leading the world in pouring concrete into estuarial ooze. That’s after we learn how to stop the pond silting up, and to build salt-water turbines that last 120 years. What’s not to like?
Alternative asset corner
It’s so hard to find value these days. Shares look dear, bonds are absurdly expensive and who knows what the gold price should be? The pound looks cheap, but that’s not much help if it’s your currency. So here are a few suggestions:
A grand circle box at the Albert Hall combines rarity with prestige, and the remaining 849 years left on the lease allows the buyer to take a reasonably long-term view. Quite close to the Royal box. Useful earner if you skip the last night of the Proms. Seats 12. £2.5m
Robert Maxwell’s yacht, delicately described in the brochure as “designed and built in 1986 for an experienced owner looking for the most spectacular yacht to cruise the seas.” She comes complete with a new name and specially strengthened handrails. Mirror Group pensioners could club together to find the £25m price tag.
Wimbledon debentures, perhaps at their seasonal low point in January, with the 2016/20 Centre Court series down from a trade at £125,000 in November to £113,500 just before Christmas. That’s for four years of Andy Murray, the right to buy the follow-on series at the issue price (£50,000 for the 2016/20 series) and just the one seat. Better buy two.
This is my FT column from Saturday