The chancellor faces a stern test in the Commons; Greggs is urged to cut down its ambitions; retailers look to the internet
As you may have read elsewhere, George Osborne has a big week coming up. On Wednesday he will deliver what must be the most eagerly unanticipated budget in decades – not least, presumably, by the chancellor himself, who after last year’s debacle, will attempt to redefine the term tax relief by escaping from the chamber with his red box intact.
Those who claim to know about these things are expecting a dull speech as, firstly, Osborne cannot really risk another downgrade to his political credit rating; and secondly, the country’s finances are still in such a pickle that he possesses few real options.
Still, the standard tactic in such situations is to launch an attack on tax avoidance – as Osborne did last year. Then he railed against dodgers holding expensive properties within “corporate envelopes” warning: “I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around the new rules are found.”
Let’s hope he’s limbered up. Tax advisers have been peppering wealthy clients with notes suggesting clever ways of restructuring their property portfolios, while, as one expert puts it: “I don’t use the word lightly, but this whole [clampdown] is pretty much a farce and will have cost a fortune to set up and operate”.
City wants Greggs to start slicing back stores
Of all the measures George Osborne has been tempted to introduce this week, sticking VAT on freshly baked goods probably never attracted him.
You’ll recall he tried that last year with a move dubbed the “pasty tax”, leaving the bakery chain Greggs (among others) to claim that the move could have a “material impact” on its profits and force it to close some stores.
Osborne doesn’t talk much about that aborted effort these days, but the issue of Greggs and the odd store closure does recur – as we will likely hear this week when Roger Whiteside, the chief executive who is just a month into the job, has his first stab at a major results statement.
He needs to come up with something approaching a strategy to make Greggs look more appetising to parts of the City. Top of the menu, according to analysts at Liberum, will be greater investment in the shops, cutting the rollout of new stores, and being more aggressive on closing underperforming outlets. Still, the early signs of Whiteside’s ability to slash are not encouraging. The company’s corporate website features a video of his predecessor, Ken McMeikan, gushing about ancient plans to add 600 new stores.
Retailers hope for net gains
Not long ago, retailers were preoccupied by acquiring more and more stores. It used to cause a right old stink (particularly with the supermarkets), but now that a glorified version of mail order is back in vogue this dash for more shops seems oddly quaint.
Tesco is so worried that internet shopping will make its vast warehouses even more unattractive places to shop that it spent £50m last week in the hope that the prospect of a Giraffe burger (it’s the brand, not a food scandal) will make a trip to the supermarket a family day out. If that shows how desperate things have become, we will get another reminder about the growing influence of internet retailing this week with two key clothing companies updating the City.
The biggest of these will be Next – which you may have noticed still possesses the odd store. That’s fine, but the City is more interested in the website, a business perfected years ago with Next Directory and which prompted a Panmure Gordon upgrade last week.
Then comes pure internet retailer Asos, which is expected to continue impressing, as well as unveiling a US warehouse plus updates on new websites in Russia and China. It’s a sign of how fashionable Asos has become that these projects are viewed as exciting. For other sectors, they’d be risky.
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