Things must be bad when Next’s mild-mannered chief executive, Simon Wolfson, is quoting second world war generals. Actually, no, the battlefield line he had in mind was William Slim’s one about how nothing is ever as good or as bad as the first excited reports would have it.
Fair point. Next has sailed through the pandemic lockdown period in remarkable style. Trading in the first half “materially exceeded expectations” and the full-year forecast is £800m, which would be the highest outcome for half a decade. Current buoyant conditions won’t last for ever, said Wolfson, but the long-term outlook for Next is “more positive than it has been for many years”, not least because the physical shops are less of a drag now that online trade accounts for 70% of turnover.
Very good. It would be a mistake, though, to think this happy portrait means labour shortages and the HGV crisis are also instances of excited reporting. Wolfson’s view was clear: the problems are real, serious and urgent and the government needs to take “decisive action” rather than fiddle at the edges with minor temporary visa schemes.
In Next’s case, the possible “degradation in our service in the run up to Christmas” doesn’t sound overly severe: online customers will cope if they have to order by 6pm, rather than 11pm to get their clothes the following day. Wolfson’s point, though, was about skills shortages that extend well beyond warehouses and lorries – to restaurants, hotels, care homes and more – and the lack of pragmatism in the government’s response.
“Visas were only granted when petrol queues started forming, when this crisis had been forewarned for so long and so loudly by so many people,” he said. “We need the immigration system to start looking forward.”
One can argue all day about business’s own role in not acting in time (for its part, Next has been recruiting and training more drivers, says Wolfson), but the problems are appearing now and higher wages are plainly only one part of the solution. Some of the answer must lie in allowing the labour market to flex and import skills that are in short domestic supply, especially in seasonal jobs.
Wolfson was a pro-Brexit business voice, so has more chance than most of being heard by ministers, who seem stuck in 2016’s ideological prisons. One hopes he gets through. There is incredulity in boardrooms over the government’s failure to form a credible, long-term skills and immigration policy. Wolfson was giving the polite version.
Ofgem’s excuses on energy starting to wear thin
Another day, another energy company collapse. Three failures, in fact, though all were relative tiddlers. Igloo Energy, Symbio Energy and Enstroga, however, still together hold 233,000 accounts, so we’re now at almost 2 million customers affected this year.
We are also, in all likelihood, at the point where £1bn will be added to the industry-wide levy through which the new “last resort” suppliers can recoup the costs of taking on new customers. Those costs have been greatly inflated by the current sky-high wholesale price for gas.
The beleaguered regulator Ofgem can warble that nobody could have anticipated such an increase and that the gains from competition must not be forgotten, but the plea is starting to wear thin. The flip side of competition, it is now clear, was a loose regime that tolerated too many undercapitalised companies.
If a few large suppliers fall over, that £1bn-ish estimate for the levy will quickly increase. Since the levy ends up being paid by customers through their bills, a chunk of the savings from many years of competition will be surrendered in one hit. The promised regulatory re-think can’t happen soon enough.
Let the hammer go down on Morrisons
An auction on a Saturday afternoon seems a strange way to sell a chain of supermarkets with 110,000 employees, but one can’t fault the Takeover Panel’s actual design of the procedure for settling the Morrisons saga.
Five rounds of bidding will be possible and, if the contest goes the distance, the Fortress consortium must make an offer at an “even” number of pence a share, and Clayton, Dubilier & Rice at an “odd” number, to avoid the possibility of a draw. That structure guarantees a clean result, at least.
And a result is what is needed at this point. The first offer for Morrisons was made public in mid-June and, behind the scenes, the action was running for weeks beforehand. That is long enough for management to be distracted from the day job.