Shocks & Stares » retail H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 en hourly 1 FPS’ Friday Fiver Fri, 13 Jan 2012 14:49:54 +0000 David Chambers Hello all and welcome to the second Financial & Professional Services Friday Fiver of the year. Apparently, Monday 16th January is set to be ‘Red Monday’ – the most depressing day of the year. With that in mind, this week’s Fiver at least attempts to lift the gloom a little with the return to blogging of our resident sharp-tongued Apprentice critic, Marie Cairney, who brings us her views on Scottish independence (as a Scot herself). We’ve also got thoughts on Tesco, Mitt Romney, cockney slang and an intriguing new report from Barclays Capital. Thanks to Ed, Jonathan and Ross for their contributions as well this week.

CAMERON THE BRAVE…..In a display of blunt brinkmanship combined with a lesson in ‘being careful of what you wish for’, the PM this week tried to push Alex Salmond into a corner on the future of the UK, most likely to the bewilderment of those around him. Perhaps buoyed by his new-found devil may care – we can go it alone – attitude recently honed in Europe, Cameron decided to raise an issue that didn’t really need to be raised right now. So much so that we were looking for some really bad news that needed to be hidden in the ensuing manufactured maelstrom.

There wasn’t any but then I guess the economic crisis can’t get much worse. Philip Clarke at Tesco might have been slightly relieved for five minutes although not even a divided kingdom could distract from those awful results yesterday (more on that below). While Marie can’t speak with any certainty or authority for a nation on how much they want to stay in the UK (being a deserter for 20 years now), she can say that if there is one thing that Scots don’t like; it is being told what to do by governments they don’t vote for, especially if they are predominantly English. Have the Conservatives learned nothing?  Instead of calling Salmond’s bluff Cameron played right into his tartan-mitted hands and raised the not inconsiderable heckles of 6 million people. Well done. Or as they say up there ‘Gaun yerself Big Man’!

Not that Mr Salmond came out of this glowing. His explanation of why we should wait until 2014 for something he has spent his ENTIRE career asking for seems equally lame. Yes, Scotland may have voted for the time-frame he proposes but the fact that they also voted for a load of other electoral goodies like free prescriptions at the same time kind of makes you think that they weren’t paying that much attention to that bit of the SNP’s manifesto. They are now though and for the first time, Marie has a slight sinking feeling in her stomach that it might actually be considered a serious option for more Scots than ever before. Hopefully common sense will prevail over patriotic, stick- it-in-the-eye-to the English fervour.  This week’s self-created constitutional crisis only confirmed something that has rumbled for some time now; that the people most likely to benefit from independence in Scotland are in fact the English. Increasingly they probably believe it too.

BUBBLES IN THE SKY…..As someone who flirted with the prospect of becoming an architect, but couldn’t stomach the seven years it would have taken to get the qualification, Ed in particular loved this stuff and it’s a great bit of PR – so hats off to BarCap. The Barclays division published a report this week which claimed to have figured out that ‘there is an “unhealthy correlation” between the building of skyscrapers and subsequent financial crashes.’ A look around London certainly could lead you to believe this is absolute fact. Still, Ed loves skyscrapers all the same. Especially this one.

THE BIG PRICE FLOP…..As it’s already been labelled by many City analysts, Tesco’s discounting programme seems to be the main lightning rod for at least the short-term woes of Britain’s biggest supermarket. A £5bn puff of smoke for their shares in one day is certainly not to be sniffed at, but what was far more extraordinary was the candid disclosure by the chain’s CEO, Philip Clarke, about the longer-term problems the retailer has battled since at least 2008 – in a nutshell, diminishing numbers of customer-facing staff in stores, which has led to a poorer ’shopping experience’. Extraordinary that is because Mr Clarke only took over nine months ago, and before that Tesco was run by the previously bullet-proof retail granddaddy, Sir Terry Leahy. In a stroke, his legacy has now become questionable.

As an interesting aside to this tale, it’s worth noting what looks like it might be a PR effort by Tesco to focus the media’s attention ahead of their results on the company’s expansion into India (witness the features on their Indian shops in both The Times and Mail today) – certainly very timely given the recent opening-up of the Indian market to foreign companies, and also a clever way to maintain focus on the Tesco success story. Alas, when your CEO issues a huge profit warning for the year ahead, not even a jolly to India can disguise it.

THE MITTS ARE OFF…..Mitt Romney’s campaign to become the Republican candidate to take on Obama appears to be gathering momentum. However, the former Governor of Massachusetts’ past has come into focus in recent weeks for his role as CEO of Bain Capital, the private equity firm. On this side of the Atlantic, we are regularly being reminded about the problem of career politicians and their lack of business or broader life experience.  We imagine similar criticisms are levelled at those in power in the US.

Romney has the opposite problem. As a man who regularly restructured companies and hired and fired, critics are on the hunt for examples of Romney wielding the axe over the average American. Of course, political debate often operates in a world where normal logic is turned on its head (as this video where his dog is brought in the equation demonstrates) and whatever the truth of the matter Romney is now the man in the spotlight.

GOOD WEEK/BAD WEEK…..Hedge Funds. Loved by few and loathed by many, especially the many who don’t work in them. This week has been something of a mixed bag for them but there appear to be signs of support emerging for the sector which is why they qualify for our Good Week award (hey, it’s been a lean week all round otherwise). On the negative side, The Economist ripped into them for posting fairly average, if not poor returns for investors over the long term. Then again, low returns aren’t exactly a phenomenon confined to hedgies over the past few years. On the plus side however, today’s FT features a compelling argument in favour of retaining and encouraging hedgies in light of RBS’ investment banking demise. The argument is simple – finance is never going to be a stable system, and hence it’s far better to contain the inherent instability in small institutions that aren’t too big to fail i.e. hedge funds. Have a read, and see if you’re convinced.

City Gent David Buik joined Twitter this week

On the Bad Week side, spare a thought for one dieing aspect of the City. According to Reuters, the accelerating change in the social background of the City’s foreign exchange traders and the march of technology is threatening to kill off traditional cockney rhyming slang in the Square Mile. It almost makes you pine for the old days, which is why we’re also celebrating the arrival of veteran City Gent, David Buik, on Twitter this week. We’ll leave you then, with some examples of cockney trader slang at its finest:

‘A prickly’ – the number 2 (as in ‘a prickly pear’)

‘A Lady Godiva’ – the number 5 (rhymes with fiver)

‘An Ayrton’ – the number 10 (Senna rhymes with tenner)

‘A Bully’ – the number 50 (from the bullseye on a dartboard)

‘Bill and Ben’ – Japan’s currency, the Yen

‘The Stokkie’ – Sweden’s currency, the Swedish Crown

‘The Nokkie’ – Norway’s currency, the Norwegian Crown

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FPS’ Friday Fiver Fri, 19 Aug 2011 15:39:30 +0000 David Chambers Hello All! August really isn’t showing any sign of slowing down is it? At the start of the week there was a collective pause for breath, but since Wednesday it’s been a case of deja vu with the world’s markets continuing to do their best impression of the Pepsi Max Big One. The focus of the Friday Fiver this week is understandably on these events, but we also find time for a bit of sporting action too. Thanks to Ed, Ross, Jonathan and new writer Helen this week.

Wither Angela, Woe Nicolas…..Tuesday’s summit between Angela Merkel and Nicolas Sarkozy was their latest attempt to tackle the Eurozone’s woes. However, no matter what they do to try and convince markets otherwise, politicians both sides of the Atlantic are still failing to win over investors’ confidence.

It's not all hugs and smiles in the Eurozone anymore - another tough week for Merkel & Sarkozy

Does democracy have any culpability for this? Well yes, it does. Merkel is finding it increasingly difficult to win domestic support for the continued underwriting of Eurozone debt – Germany’s latest growth figures won’t help her cause here either. She knows that the electorate are less likely to vote for a Chancellor who uses German money to bail out other nations, than one who does not. Despite this, the Eurozone’s survival largely depends on German financial commitment.

The recent debacle in the US over their debt ceiling and subsequent ratings downgrade was another prime example of politics trumping the good of the nation. Make no mistake, this episode was driven primarily by party political point scoring with the Presidential election around the corner – the Republican’s are already calling it the ‘Obama downgrade’.

With politicians at the helm the economic situation seems to be worsening. However, what they seem to ignore is that voters often reward politicians who show strong leadership and make bold decisions that solve difficult problems. The current status quo – a lack of leadership and an unwillingness to meet the problem head on – means that no-one wins, including politicians seeking re-election and investors craving market stability.

Big retailers in small communities…..According to the BRC, over the past week in particular we’ve seen how closely retailers are connected to their neighbourhoods. Really? This seems a curious statement given it was precisely those in the neighbourhood who smashed in their windows. For Ed, the lasting image of the riots were people walking out of JD Sports with a new pair of trainers. This is a nationwide retail outfit with a turnover of £770m. That’s a different proposition to an independent butchers or clothes store, which we’d associate much more with community.

Independent retailers face a tough task rebuilding from the riots

As neatly summarised in the Independent on Sunday: “Supermarkets are cheap and efficient. They stabilise quality and increase choice. They have transformed shopping, but this comes at a cost…The counterpoint to this has been the drastic decline of neighbourhood shops. We have reached a tipping point where the increased expansion of supermarkets will do more harm than good.”

Most agree that our high street retailers need as much help and support as they can get, especially after the riots. They are fundamental to the economy – which is why David Cameron has asked Mary Portas to lead a review into how to revive the high street. But let’s not kid ourselves about the role the big boys play in the local community. Rather, celebrate and revive the independent stores that do.

There’s more than one Olympic Games next Summer…..Awe-inspiring to spend time this week with Paralympics legends past, present and future just ahead of one year to go to the London 2012 Paralympic Games. We were lucky enough to pop into the Paralympic simulation training camp at Bath University with an eager group of national media all clamouring for a word with 11-times Paralympic gold medal winner Tanni Grey-Thompson and other assembled Paralympic royalty, including the inimitable 9 times gold medal-decorated Lee Pearson.

Humbled doesn’t really cover it when you hear stories of bright young talent including Will Bayley, current world number two table tennis player who trains for six hours a day, every day and gave a up a promising acting career after time at the Brit School for his sport; or the Paralympic swimmer Kate Grey who told her story of meeting another athlete with one arm who taught her a great lesson in life: how to put your earrings in one-handed. Helen for one will be among the first in line to bid for tickets come the start of the process on September 9th.

Good Week/Bad Week…..A bad week for US/China relations as chaos erupted in a supposedly friendly basketball match between Georgetown University and the Bayi Rockets. The contest, which was organised to coincide with Vice President Biden’s visit to China saw players brawling on scratchy camcorder replays of the scene.

It would be an inappropriate stretch to link the on-pitch animosity to the tension between the two nations. However, it’s the latest in a string of public spats between the two superpowers. Friction between the two countries is predominantly a result of economic realities – Jonathan insists you click HERE for a better explanation by dancing pandas. Let’s hope they keep the squabbles on the sports field.

No, the Chinese player's foot didn't slip in this picture, he really is going straight for the American's 'in-goal' area (Image:

Our good week award goes to tech entrepreneurs and their shareholders. In a deal likely to have significant repercussions for the mobile industry, cash rich Google snapped up Motorola for $12.5bn in the company’s quest for patents and an edge in mobile. It’s been a busy week and today we have seen one of Britain’s most successful start-ups, Autonomy, acquired by HP in a takeover worth £6.7bn.

And finally, the field of dreams…..or rather, the plastic, indoor sweaty sports hall of dreams. Last night the Financial & Professional Services team took on our arch H&K rivals, the Sports team in a winner takes all 5-a-side match at London Bridge’s T47. The result was convincing – a 13-6 win for us moneyheads. Sitting just round the corner from them today has been an unrivalled joy it has to be said.

On a more serious note, T47 is due to close soon which is a great shame. Finding a good football pitch for hire in central London is already difficult. It just got even harder.

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FPS’ Friday Fiver Fri, 29 Jul 2011 17:27:30 +0000 David Chambers We’re back, providing another round-up of some of the big stories from the world of financial services, the economy and Westminster this week. Contributors this week include Clare, Linzi, Jo and Ed, who bring us an overview of banking, pensions, retailers, and our new feature – Good Week/Bad Week.

Banking – fundamental flaws and failed customers…On Tuesday, Vince Cable held court at the Which? Banking Reform – An Agenda for Competition and Growth discussion at the Commonwealth Club, where he re-iterated his opinion that “banking is a structurally flawed industry that has fundamentally failed customers”.

Vince Cable - on the attack on banking once again (Image:

That the current system of banking is flawed is a no-brainer, but the harder question to answer is where exactly do the flaws lie? The conversation on Tuesday spanned the topics of increased competition, universal banking, ring-fencing, culture and behaviour along with new entrants into the banking market, but it seems that, nearly three years since the start of the global financial crisis, more questions continue to be posed than answered.

Is universal banking really the root of all banking evil? Do customers really feel their banks have failed them given so few of us have switched? With the array of initiatives, commissions, inquiries, and comite des sages taking place at the national, European and international levels, one has to hope that between them they will be able to identify and remedy the flaws that exist. However, there is the potential for all of these to come up with different flaws and different answers which complicate and confuse structures and customers alike!

Paying more for retirement…The spotlight returned to public sector pensions this week as figures leaked to The Daily Telegraph revealed exactly how much workers in the public sector will pay extra each month for their pensions.

Danny Alexander was asked how much more he personally would have to pay towards his pension this week (Image:

As expected, higher earners will take the brunt of the increases and the lowest paid workers, earning less than £15,000, will escape any increases at all.

Here are some of the figures from the proposals:

  • Those earning over £100,000 will pay £284 a month (£3,400 a year) more
  • Public sector workers in the £50,000 bracket will pay between £684 – £768  more
  • Those on a £35,000 salary face paying an extra £516 a year more

Despite the backlash, which was always going to happen, you can’t escape the welcome news that low paid public sector workers, some 750,000 people, will be exempt from any increase in contributions and those earning £21,000 will be out of pocket £108 a year, or just £9 a month. The fact remains that even with these increases, public sector pensions are still a valuable benefit.

We still aren’t buying much on the high street…Another worrying week for retailers as figures on Thursday showed that sales fell at their fastest pace for a year as consumers become increasingly reluctant to spend. This is brutal news for the already struggling retailers and may be a sign of further deterioration and shop closures to come.

Only one in three retailers claimed their sales volumes were up on a year ago, with food retailers being particularly hard hit – either we’ve all been hit by the rise in food costs and are watching the pennies like hawks or the nation is on a collective pre-holiday diet.

However, one retailer that isn’t afraid of the UK high street (or shall we say Oxford Street) is cut-price U.S. brand Forever 21, which opened its doors for us on Wednesday. Some critics state that we are not ready for ‘cheap, fast, American’ fashion’ but with the way things are going on the high street we may not have a choice.

George Soros - the latest financial veteran to retire

Good week/Bad week – George Soros & George Osborne…A tale of two George’s this week. For the first (the man who ‘broke the Bank of England’), the effective end of a remarkable 40 year investment career. While the manner of his retirement was a little sour, blaming US regulations, you can’t argue with his success over the years. He will likely be missed.

On the flip side, it was a less than stellar week for the younger George, who, as yet more vanilla growth figures rolled in, suddenly found himself the victim of attacks from several fronts. How he must be wishing for the summer break to roll around quickly.

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FPS’ Friday Fiver Fri, 15 Jul 2011 14:07:21 +0000 Edward Jones Well, an eventful week to say the least. We in the FPS team have looked beyond the obvious to find five other things that have happened this week. Enjoy.

Moody clouds hover over USA ratings

Photograph: Ryan24

This week, Moody’s threatened to revise down the USA’s AAA credit rating. Back in April, Standard and Poor’s revised to negative the outlook on USA ratings, a monumental move given that this was the first time that the USA’s outlook was revised down since Pearl Harbour. As the USA’s Congress and President continue to grapple over debt negotiations, it is looking increasingly unlikely that they will be able to come to an agreement before the 2nd August, after which the USA would literally run out of money and not be able to match its debt commitments.

Elsewhere financial markets are getting increasingly jittery as this week Ireland became the third Eurozone country to be downgraded to junk status –Ba1 – alongside Greece and Portugal. This downward pressure continues to strengthen fears that Italy and Spain will soon follow suit. One wonders if any country will escape what feels like a tidal wave of downgrades.

Bonuses back in vogue?

Photograph: Sky

We read with interest this week Sports Direct’s average £44,000 payout to staff after hitting profit targets. Out of 18,000 employees, 2,200 staff qualify for the bonus. This is on the basis of their employment being permanent over the last 12 months, irrespective of their position. According to the Times (£) the scheme is the most generous in the retail sector.

The move offers an interesting parallel to bonuses paid in the banking sector and the justification offers hope to the City: “There is nothing more powerful… in terms of  getting everyone pulling together… we wanted them [the staff] to see everyone is going to benefit” said Sports Direct’s Chief Executive Dave Forsey. One wonders if the banks presented their bonus schemes with the same clarity and distributed the fruits of their labours more equitably, they might not receive so much stick. Does this move represent a shift in other sectors towards a model whereby staff are incentivised to deliver for their employer? We are all aware of the success of the John Lewis Partnership, Sports Direct’s scheme seems a very positive sign in a sector which has struggled of late and could offer a way forward in overcoming low staff morale.

The cost of living (longer)

How much does it cost to retire in the 21st century? If you’re talking purely about the level of income people should have, then the Joseph Rowntree Foundation reckon that around £15,000 should be sufficient. If however, you’re asking how much it costs the state for you to retire, that’s a very different question. The bad news is the cost is rising as we continue to live longer lives.

The OBR released its first Fiscal Sustainability Report this week which provides long-term projections on how much the government will have to spend on welfare and healthcare by 2060. The answer, in a nutshell, is a lot more. Spending on health is going to increase from 8.2% of GDP now, to nearly 10% in 2060 and the separate cost of long-term care is going to increase as well. At the same time, the amount spent on the state pension will increase by over 2% of GDP to 7.9%. Put the whole package together, and ‘age-related spending’ increases from 24.6% of our GDP to 27.3%.

So what can be done about the rising cost? One answer is to raise the retirement age and hence lessen the number of years people receive their state pension, though this is proving deeply unpopular. Another is to prepare the population better for old-age and try to keep them healthier in it, which is no easy thing. This still isn’t enough though – which is why the OBR suggested we will need to raise an additional £22bn in tax each year from 2016 onwards to stop national debt spiralling away. Not what consumers who believe their disposable incomes are already shrinking want to hear as The Economist notes today.

Baby Boom to Boomerang

Our parents were the baby boomers- tuition fee free, riding on the crest of 80’s affluence, buying up property and reproducing. Whilst we are the boomerangers saddled with the debt of our education and the country and forced to return to the nest that our parents bought.  Returning home post Uni would once have made you a failure or at least a social embarrassment for the parents having to hide a 30 year old console loving son in their annexe.  But now 1 in 4 graduates are returning home and frankly, who can blame them?

Photograph: Paul Barton/Corbis available at

New findings from Endsleigh show that most rental prices in the UK have increased steadily in the last two years with the average rent now standing at £688 per month, rising to almost £1,372 in London where most grads head in search of that increasingly elusive goal ‘employment.’ Demand is also increasing in the rental market as more and more first-time buyers are finding themselves frozen out of the mortgage market due to tighter lending criteria and a lack of finance.  And this would probably account for why 41% of the three million adults living with their parents returned home to save money whilst three in ten cited that they were unable to pay mortgages.

The introduction of tuition fees of up to £9,000 a year from 2012 will increase the pressure on graduates even further, with the number returning to the family home likely to rise.

Hungry for Growth

Photograph: Reuters

This week, the GE Capital (client) team were hitting the phones to secure coverage of the first ever ‘SME Capex Barometer’, a survey of 1,000 small and medium sized businesses across Europe looking at how much they plan to invest in replacing equipment ranging from plant machinery to IT hardware to photocopiers.

In the UK, 92% of SMEs are planning to spend a staggering £74.9 billion in the coming year, although businesses in Germany and France were looking to invest even more.  Reflecting the challenges involved with pulling out of recession, businesses reported missing out on over £8bn of new businesses as a result of out-dated equipment.

As John Jenkins, CEO of GE Capital put it: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue”.

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