March 14, 2017

Pegler’s market report – 14.03.17: Fallout from the Spring Budget

As published in the Brighton Argus (14.03.17) Business on page 23 under the title Pegler’s Market Report:

Fallout from the Spring Budget

The fallout from the Spring Budget continues. Philip Hammond has rejected calls for a re-think of the Government’s tax raid on the self-employed after he was accused of breaking a key Conservative manifesto pledge. The Chancellor insisted that increasing National Insurance contributions by 2 per cent for self-employed people, which will add up to £1,000 to tax bills for 2.45 million entrepreneurs, will result in the self-employed making a “fair contribution” to public services.

John Lewis has cut its annual staff bonus for a fifth consecutive year. The 6pc bonus is the lowest since 1954, when it stood at 4pc, and comes as the John Lewis Partnership revealed that full-year profits were up 21.2pc to £370.4m, boosted by lower pension accounting charges. It also said that gross sales for John Lewis and Waitrose were up 3.2pc, with both brands increasing their market share. The company says it has been lowered because the board wants to boost its balance sheet by retaining profits.

Troubled lender the Co-operative Bank has confirmed it is engaging with potential bidders after putting itself up for sale last month as the group revealed it remained deep in the red last year. The bank, which has around four million customers, posted losses of £477.1m for 2016 as it continued to be hit by “legacy issues” of the past and rock-bottom interest rates, although it had narrowed it losses from £610.6m in 2015.

Meanwhile, shares in Just Eat have had another strong run after posting in-line full-year results. The UK delivery takeaway market has ballooned to £6.1bn from £5.5bn in 2015 as the group reported a 42pc rise in orders to 136.4m for the year. The online company allows consumers to order food from local eateries and get it delivered to their homes. Just Eat dealt with 88.1m such orders in the UK in 2016 and makes its money from a commission payment on all orders placed.

More than 800 jobs could be at risk after one of the retailers behind the Budgens chain revealed it would be closing more than 30 of its stores. Food Retailer Operations Limited, which operates 34 Budgens stores in the UK, has gone into administration less than a year after it bought the stores from the Co-op.

Keeping with the food theme, new industry data has shown that grocery inflation has doubled in the 12 weeks to the end of February. Most has been the result of rising import costs from a weaker pound since the UK’s EU referendum vote. The discount supermarkets grabbed a record share of the British grocery market last month as food inflation doubled, driven by the rising cost of tea, butter and fish.

By David Pegler, Brighton Capital Management