Fashion industry leaders have called for the three main political parties to clarify their plans to stabilise the economy and consumer confidence and give transparent information on issues such as National Insurance (NI), VAT and business rates ahead of the general election on May 6.
Leading retailers and suppliers contacted by Drapers this week shared the sentiment that consumer confidence was “hanging in the balance”, and that the incoming government would need to make “laser precision” decisions on balancing tax rises with spending cuts to tackle the £163bn deficit and prevent the country falling back into recession.
Marks & Spencer executive chairman Sir Stuart Rose said: “Now that the election campaign is underway, hopefully there will be no more obfuscation. Consumers want clarity.”
“Who would you trust with your savings - Alistair [Darling], George [Osborne] or Vince [Cable]?” asked Pentland Brands boss Andy Rubin. “The key issues are: don’t increase VAT as we need to stimulate consumer demand, not reduce it, and provide an incentive for retaining research and development and creativity in the UK.
“[The government] must recognise that brand building is a value-creating industry that should be encouraged in the UK, not just taxed.”
The issue of Labour’s proposed 1p in the pound rise in NI, which the Conservatives said they planned to reverse for those earning less than £45,000, was one of the main talking points of the week.
Retail entrepreneur Sir Tom Hunter, who owns footwear chain Office, said he was “apolitical” but added: “Crucially, it’s business that will deliver economic prosperity hence we need policies to stimulate industry not stifle it. The key priorities, regardless of sector, should focus on making the UK cost-competitive, hence I’d reverse the NI proposals, neither backing the Conservatives or Labour, in fact going way further reducing NI for the lowest paid.
“To stimulate economic growth and inward investment they should reduce corporation tax and lower personal tax. It may seem counterintuitive but if you stimulate growth in that way the Treasury tax yield would increase.”
Separately, business leaders complained that the three main political parties had so far done little to engage the business community. Most were also cautious over Labour and the Conservatives’ promises not to increase VAT.
Richard Kirk, chief executive of value retailer Peacock Group, added: “Whoever gets in will have to tackle the deficit. For retailers, the biggest worry is [the potential rise in] VAT and whether this will come along sooner, rather than later.”
Touker Suleyman, owner of shirt specialist Hawes & Curtis, womenswear brand Ghost and supply business Low Profile, said: We’re going through a dark tunnel. None of the parties so far have told us what they’re going to do. Mortgages are changing and rates are going up. There is a danger of a double-dip.”
Tim Cooper, owner of footwear supply business OPS, added: “The biggest concern for the supply base is the potential increase in tax as that is what drives down demand. Every party says they won’t increase taxation but let’s see who gets in and when the sums don’t add up what happens then. Priority number one, two and three needs to be getting the economy back into shape.”
Separately, John Lewis managing director Andy Street warned: “Whichever party wins the election, the immediate issue will be tackling the budget deficit. This is bound to dampen consumer demand and thus retailers are likely to need to plan prudently.”
Colin Temple, managing director of footwear chain Schuh, said the incoming government should think beyond short-term measures to ensure stability through 2011. He said: “Unemployment might edge forward as taxes rise… There will be lots of promises made and the feelgood factor around the election but next year will be interesting.”
Lifestyle retailer Fat Face’s chairman Alan Giles added: “There is no easy magic solution. Whichever government gets in, it will need clear, long-term vision.”
“The government needs to recognise that brand building is a value-creating industry that should be encouraged, not just taxed”
Andy Rubin, chief executive, Pentland Brands
“I think the worst thing that could happen would be a hung parliament. I’m a bit of a cynic when it comes to the polls”
“I can’t see any real positives for retailers, because whoever gets in will have to institute a real austerity programme”
“We need people to govern the country so that we create employment and we have a good strong economy for business”
“I would like to hear a bit more about what parties are going to do when they get into power. It’s time for a change”
“If VAT rises then that could have a big effect on my business. A hung parliament would affect the feeling of uncertainty”
David Reiss, founder, Reiss
“The new government could do more to boost export. National Insurance is an issue. Keeping it down would help”
Pan Philippou, chief executive, Ben Sherman
I wanted to explain why I decided to add my support in a personal capacity to the Conservative plan to slash the National Insurance rise proposed by the Government.
My memory of leaving school in the early 1980s is vivid. Following a five-minute meeting with the careers adviser and a trip to the Job Centre, my choices were all too clear - start working in a local shop for £25 a week, or sign on, join the 3 million unemployed and get £18 per week.
That £7 was significant. It was half a tank of petrol. I was keen to work and most importantly to afford that Ford Escort. So despite everything, including the state of the country, I joined the bottom rung of the retail ladder.
Retail is a business that teaches you from the beginning to obsessively control costs. Even in the small hardware shop in Portsmouth where I began my retail career in 1983, nothing was spent that wouldn’t clearly benefit the business.
That vital lesson has not been learned in the business of government. The noughties were funded by over-borrowing, fuelled by reliance on upwardly spiralling house prices and cheap imports. Our Government gorged on the fruits of low inflationary growth, without putting away anything for a rainy day. We all enjoyed it, but by the end of 2007, the rainy day was in sight.
Retail suddenly felt uncertain. Footfall plummeted and sales started to soften. We watched with disbelief and horror the first run on a UK bank in 140 years.
It was clear that things had to change dramatically. Survival meant immediate self-scrutiny. Nothing could be sacred.
At Kurt Geiger we stopped recruiting new staff. Every single purchase order had to be signed by the finance director. We had no choice but to freeze pay.
To the credit of our employees we didn’t receive one letter of complaint. They appreciated that we couldn’t just wait for the clouds to clear. Their response ensured that efficiency improved and our staff turnover decreased.
Last year, the company was able to reward store managers for their commitment and, today, more positive about the retail landscape, we have just returned a small pay rise for all.
Kurt Geiger’s small success story is down to the attitude and hard work of our employees. Although our workforce has grown 40% over the past five years, we are acutely aware that we can take nothing for granted. We are only as successful as our current performance. To be forced, because of a rise in National Insurance, to cut that hard-working, committed workforce, is to excise from our business its most important asset.
Being on the edge of survival gives retailers a sixth sense and, in my view, empathy about the issues the country faces. There is no choice. We have to face the consequence of too much debt.
The balance of sales, costs and profits is one we as business leaders naturally juggle in our heads every day. Growing sales while improving productivity and searching for efficiencies is what we spend a lot of time thinking about. As a retailer you are taught at a very early age that if your sales fall so must your costs, or you are finished. As in most businesses, our external costs always seem to be increasing. Rents, rates, duties, exchange rates, fuel and electricity, the list goes on. We get used to it and, frankly, quietly get on with dealing with the challenge month by month.
From the number of retail businesses that didn’t make it through the past two years, whether it was the high-profile collapse of Woolworths, or the silent death of many of our great independents, it seems to me wrong and irresponsible to increase business and employee costs now. We all know that to keep employment costs in line, responsible companies will have to find the savings either by restricting new jobs or cutting back current ones.
The retail sector is one of the largest employers in the UK. With a significant proportion of low-paid first jobs, retail is for many the first rung on the employment ladder, the place that shapes you, the place where you get a job before you really know what you plan to do with your life. I really worry that the decision to increase National Insurance will have a direct impact on jobs like the one I started more than 27 years ago.
I feel passionately about UK retail. It is one of the many industries in this country where we are genuinely world class. In no other sector can you learn the fine balance of creativity and science, observe the skills of managing people, costs, product design and marketing so early in your career.
I am not a member of any political party, but what I do know is that the next few years are going to be very, very difficult for this country. We should not be imposing more tax on employees and employers but we should be taking difficult and tough cost-cutting decisions. Businesses have been doing this for the past two years.
I expect my Government to have the same attitude.
Neil Clifford, Kurt Geiger