End of recession will not trigger spending spree

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Businesses need to get tougher to get ahead in 2010, argues Rob Corder

The UK has officially emerged from recession, unemployment appears to have peaked at 2.45 million, and house prices are up by 8.6 percent over the past year.

If you have survived the past 18 months, congratulations, the worst is likely to be over.

But the end of the worst does not necessarily mean that the good times are about to roll. The jewellery and watch industry is still fighting into some difficult headwinds. These include:

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The continuing decline of the high street. Jewellers still need to be in a position to sell one-on-one with their customers, but too few of their neighbours on the high street feel the same way. Stores such as Woolworths, Boots and WH Smiths and even retail banks, which have historically underpinned footfall, are gone or on the way out as the products and services they offer are increasingly sold by supermarkets or online. Jewellers do not want to find themselves stuck in shopping parade dominated by charity shops, building societies and pound stores.

Cautious consumers. Although unemployment has peaked, vast swathes of the population have shifted from long term, full time jobs to short term, part time work. This is normal as a country emerges from recession, and healthy companies will switch back to full time contracts, but for now those that have full jobs will remain fearful of losing them, and those in part time work will be anxious about securing something more permanent. Discretionary spending on items like jewellery and watches will be affected.

Tight credit. Banks and consumers are cautious. Consumers are much less likely to run up debts in the expectation that future pay rises or house price rises will bail them out of trouble. Banks see the world the same way and are not in a mood to allow their customers to run up huge unsecured debts.

Increase in VAT. The current government has already put VAT back up to 17.5 percent. A future Conservative government could go even further with rates of 20 percent being considered as a means of tackling the country’s colossal debt.

All of these factors point to tough times at least for the rest of this year, but that is not to say that all businesses will be affected equally. The headwinds apply to the difficulties in increasing sales, which is why I believe the greatest competitive advantages this year will be discovered on the buying side of the balance sheet.

Businesses that hire and develop the best people; who create the most fantastic designs or source from the most talented designers; who invest in raising the profile of their brands and stores; and who eke out efficiencies through the intelligent use of technology. These are the businesses that will gain market share from those that sit on their hands this year, and will emerge from recession as better businesses than they were when they entered the downturn.

2009 will be remembered for some of the toughest trading conditions in living memory. 2010 is no time to breathe a sigh of relief. It is time to get even tougher as businesses because a flood of consumer spending is not going to arrive to save passive or exhausted company owners.

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