UK retail sales jumped 0.4% in July, the Office for National Statistics said today. That’s twice as much as expected, despite coming on top of another big jump in the previous month. Household goods were the big success story, enjoying their biggest monthly rise in sales for three years, while clothing was 10% up on last year. That’s good news for retailers – the biggest of whom, Tesco, continues its ominous (as far as the banks are concerned) push into the financial services sector. But whether it’s a sign that the economy is out of its slump is a bit more debatable...
Retails sales are now up 3.3% for the year to date, which is a pretty surprising statistic given the high street carnage that many retailers have been complaining about. Although there have been some high-profile casualties, some shops are continuing to pull in the punters – and the fact that non-food sales like household goods are rising again, after plummeting at the start of the recession, might seem like a sign that things are picking up again. Unfortunately it may not be that straightforward: if/ when taxes go up (for instance when the temporary VAT cut expires) there’s a good chance that spending will drop off again. At the moment the Government is desperately encouraging us to spend what’s left of our money like there’s no tomorrow, but that can’t last forever.
Tesco has been getting a lot of stick for its recession performance lately, which always strikes us as a bit strange for a retailer that’s continued to grow sales and still has a 30%+ market share. But it’s making use of its huge financial strength, geographical reach and brand awareness to push into an entirely new area: financial services. Today its Tesco Personal Finance arm said it would create around 800 jobs by opening a new customer service centre in Glasgow, the wheels having been oiled by a £5m grant from the Government, which is trumpeting this as part of its masterplan to create more competition in the sector (and more significantly, is desperate to see the extra jobs in Scotland).
Before long Tesco (or at least its Personal Finance arm) will be a fully-fledged bank competing with the high street incumbents – and since it already has 6m customers, we suspect they’ll be a little nervous about the prospect. Whether or not retail sales keep growing in the next few months, it’ll be interesting to see how Tesco gets on. It displayed a retailer's eye for a bargain by snapping up the other half of this joint venture on the cheap from its ex-partner RBS, but banking is a different game to retail. Current accounts and credit cards are one thing, but once it starts doling out mortgages (thus raising the prospect of having to foreclose on people), there might be some difficult implications for its brand...
In today's bulletin:
July borrowing soars to record high as taxes dry up
Record A-level results fail to quash skill gap fears
Retail sales up as Tesco accelerates banking move
Government told to turn skilled managers away
Businesses get militant about staff web use