Speaker 1: Three to one. Hi, this is Neil Brennan. I'm a
Speaker 1: UK Social editor at Bloomberg. It's Kate Creator. I'm food
Speaker 1: editor here at Bloomberg in London. I'm Phil Aldrich, the
Speaker 1: senior economics reporter for the UK at Bloomberg News. My
Speaker 1: prediction for three is that one story that a lot
Speaker 1: of people will be talking about is Manchester United. If
Speaker 1: the Glazer family do a deal to sell Manchester United,
Speaker 1: I think that will reshape the way we think about
Speaker 1: big money deals in British football potentially. And in the
Speaker 1: thing I'm most excited about is up cycled products. But
Speaker 1: this is going to be a very big year to
Speaker 1: see ingredients and products made from items like the pulp
Speaker 1: and the holes that are left over from oaknok production.
Speaker 1: And what I'm looking for this year is Rashi Selects
Speaker 1: Growth Plan. Business groups say the government has not got one.
Speaker 1: At the last growth plan, former Chancellor Quasi Quattings nearly
Speaker 1: blew up the economy, which sets a high bar for
Speaker 1: excitement levels and at least proves the plan that can
Speaker 1: have an impact. My name is Conrad Quilty Harper and
Speaker 1: I'm the UK Digital editor at Bloomberg UK and my
Speaker 1: prediction is about another Elon musque hobby, specifically the SpaceX
Speaker 1: Dear Moon mission. The plan is to send a group
Speaker 1: of artists on a spaceship around the Moon next year,
Speaker 1: which sounds so crazy it might actually happen. I'm Bloomberg
Speaker 1: opinion columnist res Raphael, my name is Joe Eastern and
Speaker 1: I'm UK stocks reporter at Bloomberg. This is my prediction
Speaker 1: for three. I'm joint stay Pig. I'm the author of
Speaker 1: Bloomberg's Money Distilled News Later. The valuable I'll be watching
Speaker 1: the next year is unemployment. That's going to be key
Speaker 1: to the severity of annualization and also to what harps
Speaker 1: we host places. Is it rolling strikes, A lengthening NHS
Speaker 1: wait list now seven point two million people and following
Speaker 1: house prices will make it very difficult for Rishi soon
Speaker 1: acts conservatives to restore voter faith in the party. I
Speaker 1: reckon UK house builder stocks will rebound in the new
Speaker 1: year after dropping about fifty in two Those share prices
Speaker 1: is suggesting that there will be a sharp decline in
Speaker 1: UK property prices and builders will have to write down
Speaker 1: the value of the land that they own. That seems
Speaker 1: a little bit extreme to me, they want a personal note.
Speaker 1: I kind of hope it's true because I want to
Speaker 1: buy a flat next year. I'm David Merritt's and I'm
Speaker 1: Franci Laqua and this is in the City Bomberg's podcast,
Speaker 1: connecting you to the stories and the voices at the
Speaker 1: heart of the City of London. Now this week, David, next,
Speaker 1: we're going to unpack the predictions and expectations for two
Speaker 1: sectors at Briggs. Love to talk about retail and housing,
Speaker 1: absolutely so first onto retail shopping, and to help us
Speaker 1: to do that, we have our UK retail reporter Katie
Speaker 1: Linsel and opinion columnist Andrea Felsted, who writes a part
Speaker 1: consumer Goods and the Retail Industry. Thank you both for
Speaker 1: joining us. Thank you. As we go into are people
Speaker 1: spending less on high ticket items? Are they spending more
Speaker 1: on other things? Well, we're seeing spend on real luxury
Speaker 1: brands hold up, because of course not everyone is impacted
Speaker 1: by the cost living crisis. But if we look at
Speaker 1: the more general spend across the population, we're really seeing
Speaker 1: that people are prioritizing essential goods. They are looking at
Speaker 1: their spent on food, They're looking at their spend on energy,
Speaker 1: and so really they're looking at those sort of crucial items.
Speaker 1: We're seeing less spend on fashion. I think it's about
Speaker 1: three quarters of Brits and a recent survey I read
Speaker 1: of pulling back on buying sort of fashion and shoes
Speaker 1: and items like that. Um, so yes, it really is
Speaker 1: focusing on sort of crucial items that you have to
Speaker 1: have at home. I was in I was in the
Speaker 1: Westerndord Saturday for for a wedding and I've never seen
Speaker 1: so many people swarming the streets upper down Regent Street.
Speaker 1: Is that I think? Is it too early to say
Speaker 1: obviously it's Saturday for Christmas? Looking like a boom? Tag did?
Speaker 1: This did not look like a capital city of a
Speaker 1: country in recession, which is supposedly where we are right now.
Speaker 1: Right it was booming. I mean I also stopped into
Speaker 1: a bit of sort of lunch break shopping at a
Speaker 1: brand that I weren't named necessarily, but they were really buzzing.
Speaker 1: And so I think in certain brands people are trying
Speaker 1: to get their shopping done for Christmas. And also, of
Speaker 1: course we've had the rail strikes recently, so when there
Speaker 1: is some let up from that and some let up
Speaker 1: from the snow that stop people from getting out their
Speaker 1: homes potentially, then then they are using those windows to shop.
Speaker 1: Of course they're still also shopping online. But I think
Speaker 1: really the truth will be told in January when we
Speaker 1: see retailers come back and give us their figures for
Speaker 1: how their Christmas training periods went. And also behind all
Speaker 1: of those or those images of people flocking to shops
Speaker 1: is inventory levels. And compared to this time last year,
Speaker 1: retailers are holding more inventory. They had to order very
Speaker 1: earlier in the year. They had to think about supply
Speaker 1: chain issues, which you know, ironically supply chains have got
Speaker 1: easier over the course of the year. They're holding more stock.
Speaker 1: They really need to shift it. So we've seen more
Speaker 1: and more discounts and bigger discounts. So I think, yeah,
Speaker 1: we've got the truth ahead of us in January. And
Speaker 1: so there was also this pretty amazing actually Morgan Stanley
Speaker 1: report saying that young adults who live with their parents
Speaker 1: are fueling the luxury boom. So is it the case
Speaker 1: that you know, people are getting married less at the
Speaker 1: moment because everything is so expensive, they're stopping to rend
Speaker 1: moving out with their parents and buying a Gucci bag.
Speaker 1: I would take that with a pinch of salt. It
Speaker 1: probably has got some impact on spending. But the truth
Speaker 1: is luxury has had a phenomenal run, particularly in the US.
Speaker 1: The US really has been the engine of luxury growth.
Speaker 1: And yes, some of that has been coming from young people.
Speaker 1: Young people have discovered luxury, but I'm not sure if
Speaker 1: it's down to them living with their parents. I think
Speaker 1: it was due last year to crypto gains, to stock
Speaker 1: market gains, and we have seen some of that reverse
Speaker 1: um and there are signs that they you younger, more um,
Speaker 1: the younger consumer, who is more sensitive to macroeconomic conditions,
Speaker 1: has begun to pull back from luxury. I mean we've
Speaker 1: seen that year Andrew Ham, you know, LVMH become the
Speaker 1: biggest company by market value in Europe. It's it's powered
Speaker 1: parents overtaking London in fact, is the kind of biggest
Speaker 1: market capitalization. From what you're saying, do we think we've
Speaker 1: peaked then in luxury off this phenomenal year, all this growth,
Speaker 1: Doree look a bit tougher than for the luxury end
Speaker 1: of the morning, It definitely does. As I said, the
Speaker 1: US really has been the engine of growth. For luxury um,
Speaker 1: crypto falls, stock market gyrations, that's all starting to take
Speaker 1: its tall on spending. Okay, the super richer still spending,
Speaker 1: but that younger, more sensitive consumer. They've got inflation and
Speaker 1: they've got higher housing cost that is all starting to
Speaker 1: take its hole and luxury spending on. Where we've seen
Speaker 1: that most is in the secondhand watch market, so that
Speaker 1: had a really remarkable boom um this time last year,
Speaker 1: and over the last six months that's really calmed down.
Speaker 1: So that's an indication that some of that froth that
Speaker 1: was driven largely by crypto is starting to come out
Speaker 1: of the market. But Katy, if you're in the market
Speaker 1: for a luxury handbag, and I'm not saying anyone here is,
Speaker 1: but if you were to be in the luxury market,
Speaker 1: I mean everything is four higher than it was even
Speaker 1: two years ago. So some people say, look, you buy
Speaker 1: some of these handbags and they're an investment piece, but
Speaker 1: how the hell can anyone afford it? Yeah, absolutely that
Speaker 1: for many people that's just not accessible. And you know,
Speaker 1: by contrast with seeing anecdotes of families saying, you know,
Speaker 1: this Christmas, we're actually going to hold back from buying
Speaker 1: gifts for each other. We're going to focus on the
Speaker 1: food that we put on our Christmas table or people
Speaker 1: buying their loved ones essential goods. So yeah, I think
Speaker 1: there is a definite split between the consumer here. So
Speaker 1: looking at the other end of the market then moving
Speaker 1: away from luxury, the people who are really feeling the
Speaker 1: pinch in this economy. Are they trading down? Are they
Speaker 1: doing I mean what what behavior are we seeing in
Speaker 1: kind of the supermarkets and the big the big department stores. Yeah,
Speaker 1: we've seen a lot of trading down this year already.
Speaker 1: So the German discount has, Algae and Little have gained
Speaker 1: a lot of market share. UM Algae has knocked Morrison's
Speaker 1: off the spot of the fourth biggest UK grocer. UM
Speaker 1: and within supermarkets, but also seeing shoppers trade into own
Speaker 1: label goods, so they're really looking to save money in
Speaker 1: sort of every way possible. Um. There were anecdotes earlier
Speaker 1: this year or so. I think it was a tesco
Speaker 1: of shoppers asking for the checkout staff to sort of
Speaker 1: stop at forty pounds or you know, stop at a
Speaker 1: certain level, we just can't spend any further. UM. And
Speaker 1: we've also seen supermarkets bring out sort of different sort
Speaker 1: of savings programs or different sort of credit options to
Speaker 1: help people try and spend more. So is there a
Speaker 1: department stories there? It come key that you look at
Speaker 1: as the kind of Bellweather on how people are spending
Speaker 1: in the UK, so that the oldies is the John
Speaker 1: Lewis and what are what are people actually buying also
Speaker 1: like things to make up for the huge rising energy cost.
Speaker 1: I think Next has been seen as the high street
Speaker 1: bell Weather for quite some time. They're there ran very
Speaker 1: conservatively and but but even Next had to profit one
Speaker 1: I think on two occasions this year. Um, it's very
Speaker 1: hard for them to call that's what they keep saying.
Speaker 1: And of course Next cells range of products including homewears
Speaker 1: and furniture, and that is a really tricky market at
Speaker 1: the moment because people bought all those goods during the lockdowns,
Speaker 1: didn't they They don't need to be buying those sort
Speaker 1: of items now during cost of living crisis. Um So yeah,
Speaker 1: I think Next is a key one to look at. Um.
Speaker 1: But people people are really pulling back from those more
Speaker 1: sort of frivolous purchases, the fashion, the furniture, and there's
Speaker 1: going to be an impact for some of these companies
Speaker 1: that could be funny dramatic. I mean, when you think
Speaker 1: about recessions passed, you think of boarded up shops right
Speaker 1: and high streets really taking the hit. And obviously my
Speaker 1: sojourn into the West End that isn't a reflection of
Speaker 1: the country as a whole. But as I said, it
Speaker 1: was booming there. I mean, andreware, we're going to see
Speaker 1: boarded our shops. Are we seeing retailers possibly going to
Speaker 1: the wall next year if the froth is coming off
Speaker 1: the market more, that is possible. I actually don't think
Speaker 1: Christmas will be that bad. I think not much really
Speaker 1: has hit yet. Yes, we've had some energy increases, food increases,
Speaker 1: but we've had the government help on energy, and consumers
Speaker 1: are very good at adapting. As Katie said, they are
Speaker 1: changing their behavior. So you see a headline very high
Speaker 1: level of inflation for the consumer, but they die all
Speaker 1: that out themselves by shopping in little, by trading down.
Speaker 1: So and the mortgage time one that that is being
Speaker 1: predicted that hasn't really hit yet. As we go through
Speaker 1: next year and more and more people will come off
Speaker 1: their fixed rates, So I think Christmas will be okay.
Speaker 1: But then when we get into January, singers are a
Speaker 1: lot tougher. The credit card bill starts to land, the
Speaker 1: big energy bills come in, particularly after this cold snap,
Speaker 1: the more people roll off their fitxed rate mortgage. So
Speaker 1: I think it will be the first quarter of next
Speaker 1: year and into two thousand twenty three where we do
Speaker 1: see that Paine. When that happens, then I think we
Speaker 1: could see it's very likely that we see more of
Speaker 1: that pain and more of those casualties. But andrew to
Speaker 1: David's very good question about whether companies or you know,
Speaker 1: sharps will go bust. The high street has changed so
Speaker 1: much since the last financial crisis. It's much bigger change.
Speaker 1: I guess that I've taken over the high street. So
Speaker 1: does that change the dynamics that it's not the independent
Speaker 1: shops that can go bust, Because at the end of
Speaker 1: the day, some of these bigger sharps, even if they
Speaker 1: don't do so well in certain parts of the country,
Speaker 1: have deeper pockets. That's right. And when you look look
Speaker 1: at the casualties that we've had ad over the last
Speaker 1: safe three to five years, most of the big obvious
Speaker 1: names have gone, the ones that we all had on
Speaker 1: our watch. This Debonam's Arcadia. They've all gone already, so
Speaker 1: if there are casualties, they will be another it will
Speaker 1: be another layer down off stores that that fail. We
Speaker 1: have also just jumping in there, we have seen sort
Speaker 1: of some key names going to insolve the s in
Speaker 1: just in recent weeks, and I think Andrew is really
Speaker 1: right the next quarter will be a really interesting one.
Speaker 1: So you know, if some of these recently that we've
Speaker 1: seen struggle Made dot Com, as I was saying, furniture
Speaker 1: a read difficult category and online only, you know, are
Speaker 1: they going to really keep shoppers loyalty in this kind
Speaker 1: of environment. So yeah, we saw Made dot Com grey
Speaker 1: to insolvency jewels as well the high street fashion brand.
Speaker 1: Both of those are bought out of insolvency by Next
Speaker 1: and Mike Ashley's Empire Phrases group has also been doing
Speaker 1: a lot of buying upper struggling brands on the high Street.
Speaker 1: So for a lot of retailers, this is actually going
Speaker 1: to prove a bit of an opportunity, or at least
Speaker 1: for those biggest, really really strong retailers. So I think
Speaker 1: want to see called at of M and AM interesting
Speaker 1: and you know it's I guess the first Christmas we've
Speaker 1: had for a while, sort of in the post COVID period,
Speaker 1: at least in this country. I mean there's a lot
Speaker 1: of it around obviously, but I think in terms of restrictions,
Speaker 1: people are less nervous about it. We talked about how
Speaker 1: COVID accelerated some changes to the economy and you know,
Speaker 1: the shift to online, where we are now all those
Speaker 1: people teaming the streets. Still people want to visit retail
Speaker 1: locations or are they're going to do a lot more
Speaker 1: sitting on their sofas. David's been shocked. He experienced Oxford
Speaker 1: Street on Saturday. It was horrible. I mean, yeah, Oxford
Speaker 1: Street is the sort of pumping heart of our retail environment,
Speaker 1: isn't it. So it should be super busy at this
Speaker 1: time year. Um. Look, a lot of people shifted to
Speaker 1: buying online during the during the COVID pandemic. We know that. Um,
Speaker 1: there's been a big surprise at how much that hasn't
Speaker 1: stuck really even though still how many people work from
Speaker 1: home and we've got a lot of hybrid working. It's
Speaker 1: been proven that people like to shop in person. It
Speaker 1: is only yes, yes, So there's been there's been a
Speaker 1: bit of a shock and your wayfare is another one
Speaker 1: that comes to mind, having to cut loads of jobs.
Speaker 1: So it has been I think a bit of a
Speaker 1: wake up call for some of those online only brands
Speaker 1: that actually people do enjoy going back to shop in person.
Speaker 1: And then of course with Royal mail strikes, that also
Speaker 1: means that people wanted to shop for Christmas have found
Speaker 1: they can't depend on those deliveries arriving on time, and
Speaker 1: I think that's been really tough, especially for sort of small,
Speaker 1: more independent retailers who rely on Royal Mail. So there's
Speaker 1: a mix going on at the moment. But yeah, I
Speaker 1: think online is not having the kind of happy ride
Speaker 1: that many expected. I was asked this morning, who in
Speaker 1: the newsroom has an electric blanket? My answer was who
Speaker 1: does not have an electric blanket? Time? Is that what
Speaker 1: people are buying at the moment energy efficient because the flavor? Yes, yeah,
Speaker 1: so definitely electric blankets sales are up. Usually air friers.
Speaker 1: I mean I was having a conversation this weekend about
Speaker 1: air fryers. They're really taking off, and I think it
Speaker 1: was Curries who were saying last week at their earnings
Speaker 1: that they're at least trying to give the image that
Speaker 1: people are trading up within the electronic products that they offer,
Speaker 1: so looking to buy more energy friendly um, washing machines,
Speaker 1: tumble dryers, all these different products. Um. So there you go.
Speaker 1: There is a market for those goods at the moment.
Speaker 1: For our for Christmas everyone, I'm not I'm not sure
Speaker 1: Mrs Merron would be fried turkey. Thanks. Um. So what Andrew,
Speaker 1: what are your other predictions for where this market is
Speaker 1: going to turn next year? I mean, you mentioned again
Speaker 1: about consumers getting smart about finding ways to save money. Um,
Speaker 1: the inflation seems to have peaked, right, so it's the
Speaker 1: picture of that going to get better next year. It
Speaker 1: could do, it could do. I think there's there's more more,
Speaker 1: you know, there's there's more pain still still to come.
Speaker 1: I mean, I I would think unless inflation comes down
Speaker 1: very sharply, it looks it looks very tough for people
Speaker 1: next year. The other thing to watch will be employment
Speaker 1: because it consumers tend to change their habits and most
Speaker 1: when unfortunately they lose their jobs or they see their
Speaker 1: friends being made redundant. And thankfully we haven't seen large
Speaker 1: job losses yet. So if if employment can stay pretty stable,
Speaker 1: and full then that should be good. But I think
Speaker 1: there are so many pressures next year that I think
Speaker 1: it is going to be a really, really difficult, difficult year.
Speaker 1: And while I'm optimistic for this Christmas already, I'm pessimistic
Speaker 1: for next Christmas. Andrew, do you have any insight into
Speaker 1: how many companies were able to raise prices in the
Speaker 1: last six eight months that won't be able to do
Speaker 1: so next year. Everybody is going to struggle to put
Speaker 1: through more price increases. I mean, we've seen some of
Speaker 1: the prices come through, um, but next year we will
Speaker 1: still see more of it, particularly and consumer goods. And
Speaker 1: there tends to be a lag between modity costs going
Speaker 1: up and prices going up, and so we will still
Speaker 1: see more inflation coming through in consumer goods, and it's
Speaker 1: going to get harder to persuade people to pay those
Speaker 1: prices when they're incomes are under pressure. Do you agree
Speaker 1: with that, Katie Bleak Bleak forecast the FRAI is going
Speaker 1: to be rough next year. I think employment is the
Speaker 1: key thing to look at, as Andrew says, um, and
Speaker 1: you know, to some extent, when we get out of
Speaker 1: the really cold weather, may things start to look a
Speaker 1: little bit better people that have to worry so much
Speaker 1: about energy bills. But yeah, there's there's a certain amount
Speaker 1: of time that we can all put up with our
Speaker 1: budgets being stretched to the extent that they are right.
Speaker 1: Um So, yeah, you don't speak to many retailers who
Speaker 1: are upbeat at the moment. Let's bit that way. And
Speaker 1: also they're all finding it very hard to forecast, so
Speaker 1: they can't say at what stage next year it might
Speaker 1: start to get easier. Um So yes, I think for
Speaker 1: our pessimism is the way forward. Katie and Andrew, thank
Speaker 1: you so much for joining. Thank you thanks for listening
Speaker 1: to this week's in the City. We'll be back next week,
Speaker 1: but in the meantime, if you like our show, please
Speaker 1: head on over to Apple Podcasts or wherever you listen
Speaker 1: to podcasts and a rate review. Unsubscribe. This episode was
Speaker 1: hosted by Me David Merritt and Me Francie Laqua. It
Speaker 1: was produced by Summersadi, editing and sound designed by Blake
Speaker 1: Maples and special thanks to Andrea Felsted and Katie Lindsel.