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“RSA Update”

THE BUDGET

The Budget announcement of a rise in the standard rate of VAT to 20% surprised nobody. However, retailers could be excused thinking that the timing of its implementation is overly cynical. After the last changes in the rate of VAT, many retailers complained, explaining quite reasonably that January is one of the worst months in which to do it, for all sorts of very obvious operational reasons. You would think that if government consultation with the industry had any meaning this lesson might have been taken on board. But no, January it is again. Those of a cynical bent might just think that for the government the price disruption in the January sales forms the ideal backdrop to a VAT increase, masking its effects and ensuring that retailers help to absorb or spread its impact.

Indeed, the Office for Budget Responsibility has assumed in their figures that retailers will take a third share of the pain by not passing on the full rise in VAT in the form of higher prices to consumers. On past form, we all know how this works – the big multiples will use their raw market power to ensure that the pain gets passed firmly down the food chain to their suppliers, with no chance for the latter to decline the chance to “help”. Meanwhile, smaller retailers either eat into their inadequate margins to stay competitive or else put up their prices, losing custom as a result. We have all seen it happen before.

This time, however, there is a difference. There should be a Grocery Ombudsman in office when the change takes place.

Ken Parsons, Chief Executive of the RSA, said, “This will be a real test of the Grocery Ombudsman. It is clearly a misuse of market power for a large supermarket to make suppliers assume part of the increased VAT bill that is properly a cost to the retailer. We would expect the Ombudsman, when appointed, to immediately ensure that this aspect of the market works fairly and transparently. If the large multiples want to hit their own bottom lines by absorbing part of the VAT rise for competitive reasons, then it is their shareholders who should take the pain. We would then expect these shareholders to hold the directors of these companies to account for their policies”.

ALL CHANGE FOR THE QUANGOS

The government’s bonfire of the quangos will inevitably impact on rural businesses, including shops. The widely-trailed abolition of the Regional Development Agencies (RDAs) will see their roles passing to new Local Enterprise Partnerships, with a white paper due later this year on how these will operate. Ken Parsons, Chief Executive of the RSA, said, “The RSA is not a great fan of most of the RDAs. With a couple of honourable exceptions, their priorities seem to revolve around large schemes in towns rather than small businesses in rural areas, but nevertheless several months uncertainty about what will replace them is not helpful in today’s economic climate. We would urge the Government to make sure that the decisions surrounding the setting up of Local Enterprise Partnerships are addressed as soon as is practical”.

The second announcement to affect RSA members is the proposed abolition of the Commission for Rural Communities. Set up in 2005, the Commission and its chairman, Dr Stuart Burgess, have been effective advocates. They have ensured that government policy takes into account the needs of rural communities, for example, by establishing ground rules by which new legislation can be “rural proofed” to ensure that it does not have unintended consequences in rural areas.

Ken Parsons said, “The disappearance of the Commission for Rural Communities will mean that organisations like the RSA will need to redouble our efforts to ensure that the rural dimension does continue to inform government thinking. The RSA has recently written to all English MPs with rural constituents alerting them to some of the issues affecting rural shops and we will continue to help fill the gap left by the demise of the old Countryside Agency and its short-lived successor”.

....MY SHOP IS YOUR SHOP 2010

The 2010 MSYS campaign is intended to encourage retailers to stay active all year, rather than just for a couple of weeks. New ideas include

- A mentor programme, whereby MSYS retailers will provide examples to other retailers of how MSYS can be used succesfully

- A polo shirt that can be worn year round (so it won’t be yellow then!). To obtain shirts go to: http://www.myshopisyourshop.co.uk/Retailer-Zone.asp

- A ‘Little Book of Big Ideas’, filled with promotional ideas to help retailers raise their profile in their local communities. This can be found at:http://www.myshopisyourshop.co.uk/downloads/msys-little-book-of-ideas.pdf

- Launch of a new media campaign using twitter and facebook, to promote MSYS to both retailers and consumers. See www.facebook.com/myshopisyourshop and www.twitter.com/msys_2010

Key Dates are:
May 31st to June 6th : National Independents Week.
June 2nd National Cuppa Day
September 2nd Walk and Shop Day.

Netto takeover bid by Asda

The proposed takeover of Netto by Asda poses an immediate challenge to the new government’s commitment to competition in the grocery industry. The Competition Commission’s report in 2008 showed that the big 4 grocery chains were enjoying buying terms that were far better than their smaller competitors. We believe this gap is far wider than can be justified simply from the economies from buying in greater quantities. It reflects the exercise of raw market power and the further concentration in the industry is an inevitable result.

Netto has about 200 stores in the UK and as a middle-ranking player, is one of relatively few companies that can provide a real alternative to the big 4.

Ken Parsons, Chief Executive of the Rural Shops Alliance, said, “This deal is another step that will further concentrate market power with the big 4 supermarket chains, which already control over 70% of the UK grocery market. It highlights how the market often moves much faster than government policy and emphasises yet again the urgent need for the appointment of a strong grocery ombudsman to ensure fair play for suppliers as the balance of power tilts still further in favour of their supermarket customers”.