Retail

Shoppers rush out for their retail fix, but will they keep spending? | Larry Elliott


After three months of being deprived of a retail fix, it was only to be expected that shoppers would be out in force following the relaxation of lockdown rules in England. Sure, the weather was Arctic in parts of the country, but it takes more than the odd snow flurry to dampen the enthusiasm of the consumer to have a bit of a spending spree.

That, at least, is what those businesses that need the physical presence of their customers – hairdressers, gyms, pubs, cafes and so on – are relying on, anyway. The hope is that the gradual opening up of the economy will unleash pent-up spending over the coming months.

First signs were encouraging. Bars that opened as the clock struck midnight found plenty of takers for a pint. There were queues outside stores selling trainers that young entrepreneurs think they can shift online again for a quick profit. Perhaps more significantly, footfall on high streets and in retail parks was well up on last week – though still down on the same day two years ago, a long-lost time of innocence when pandemics, mass vaccination programmes and needing face masks to enter shops were the stuff of sci-fi movies.

Economists always say that it is unwise to read too much into one month’s data, and that advice applies in spades when it comes to one day’s footfall figures. The real tests will be whether the footfall is converted into actual purchases and whether the initial spurt of activity is sustained.

Households certainly have the financial firepower. In February, the Bank of England said that between March and November consumers accumulated at least £125bn of savings in excess of what they would normally set aside. That figure is now perhaps £50bn higher after another three months of lockdown.

Based on past experience, the Bank estimates that about 5% of the excess savings will be spent: a relatively modest amount in the context of an economy with an annual output of £2tn. Yet, as Threadneedle Street fully admits, past experience is of limited use in such unprecedented times.

There is a possibility that people are so scarred by the experience of the past 12 months that they simply sit on their accumulated savings. But unless a worsening health picture necessitates fresh restrictions, it seems more probable that this summer will see more visits to pubs, cinemas and theme parks as people treat themselves.

Darktrace more likely to deliver

Deliveroo’s stock market debut turned into Floperoo. So will shares in the cybersecurity firm Darktrace disappear without trace when it is floated on the London market for an estimated £3bn later this year?

Well, obviously they might, though there is no real reason why the Deliveroo debacle should have any bearing on how Darktrace fares. Yes, both are technology companies. Yes, both have yet to make a profit. But that’s just about as far as the comparison goes.

There were specific reasons why investors were wary of Deliveroo. Conditions last year were about as propitious as they could be for a firm that home delivers meals. There were concerns that the company’s business model would be affected from court actions giving gig economy workers enhanced employment rights.

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Darktrace was founded in Cambridge and uses artificial intelligence to help companies defend themselves against cyber-attacks. Its main market is the US, where there is ample – and growing – demand for the sort of service it provides. What’s more, companies threatened by hostile attacks will be prepared to pay premium prices for products that work. That means high operating margins – and a more appetising prospect for potential investors.

Johnson sticks it to old rival

There are two possible interpretations for Boris Johnson’s decision to announce an independent inquiry into the lobbying scandal involving David Cameron and Greensill Capital.

The first is that this is a classic case of the government kicking the issue into the long grass, where it will lie until the heat is off. That’s what Labour suspects.

The second is that Johnson is relishing the opportunity to stick it to one of his oldest rivals, which is why he has chosen a well-respected figure – Nigel Boardman – to head the probe. Probably, it’s a bit of both: damage limitation for everybody – apart from Cameron.



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