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Recession – How we got here

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We all shop… that is not in question.  But the new generation now visit the purpose built shopping malls for the ‘experience’, whilst they browse the internet for every day purchases.   The shopping mall has become a visitor attraction with cinemas, restaurants and high street shops all vying for our hard earned cash.

This trend has in turn lead to an increase in the credit economy, with large purchases being made instantly via the credit card.  As we have been told repeatedly by the media, the debt per head of the population has increased 5 fold in the last 10 years here in the UK. Most of this has been fuelled by the demand for housing and the need by the consumer to finance the ever increasing house purchase price.

House prices

So why have people been buying 2nd and third homes, or building up a buy to let portfolio.  How has this been financed?

Deregulation in the mortgage market in the mid 90’s allowed banks and building societies to offer new mortgage vehicles for those individuals who wanted to take advantage of the increase in house prices. Suddenly the ‘comfortably off’ all had access to that holiday home on the Norfolk coast or that apartment for the son or daughter at university.

The property entrepreneurs seized the opportunity to use the capital growth in mortgaged property to use as a deposit for a third, fourth fifth property.  As a consequence the buy- to let  market started.  In the mod 90’s cash rich foreign investors were moving into the London property market and buying up prestigious address in Knightsbridge Kensington and Chelsea which in turn enabled the newly sold up residents of these areas to move into less prestigious areas of London to do up houses to take advantage of house value inflation.  This in turn had a ripple effect across the South East and the home counties and by the late 90’s areas such as the north East, North West and Wales were experiencing unprecedented demand for housing.  The construction industry geared itself with large volumes of 2 bed and 3 bed apartements being built in gated communities across the UK.  In London brown field sites were converted to gated apartment communities, in Manchester the old mils were converted resulting in the icon of the 80 te Hacienda club being converted to apartments.  In the North East The old ship building industrial areas have been converted to eye catching home and leisure complexes.  Urban regeneration in Liverpool Sunderland Birmingham and Southampton have all fed the unprecedented demand for the buy to let market and the need for families to own more than one home.

Capital growth through house inflation has lead to a high gearing of debt to deposit across the UK consumer society with 60 quarters of house increases.

That these factors have contributed to this growth is not in dispute but experts are now starting to see that the change in the pension structure combined with market deregulation may have contributed to this unprecedented growth.

So what change in the pensions?  In 1997 Gordon Brown the then Chancellor abolished corporate tax relief on individual pension contribution schemes, forcing the early closure of final salary schemes offered by companies and forcing the middle classes to invest in other vehicles to support their retirement funds.

Public Spending

In 1997 the Labour party won the election on the back  of strong campaign to support and invest in public services.  The levels of public investment has also had an effect on company profits and individual wealth.

Economic Cycles

The growth in house prices and  the increase in public spending has lead to an increase in consumer confidence, which in turn has lead to increased demand for mortgage refinance as low interest rates make equity release more viable. This puts cash straight in to the household pocket book.  Optimism and available cash fuels credit release and the high street benefits from increased sales, which puts demands on the global economy to produce more goods and services.

Target Prospecting

So how does this impact upon your organisation?  How important is, knowing who your customers are? What they spend their money on?  Where they spend it? Who are your most profitable customers and do you need to keep you least profitable ones?  Is there another way I can work with my customers?  If you follow that line of investigation we need to know what ‘value’ the consumer perceives in product A over product B.  What value does a household see in shopping at this brand of supermarket over another brand of super market?  In this day of instant transport how important is the car and supermarket location to the buying decision. What is the frequency of purchase on the internet?  What other products do your customers buy in other outlets and could you source these as well?


Do demographics influence the shopping basket? If so are current trends and modelling as valid today as they were yesterday. We know that today’s household shopping basket is changing with marriage declining, single households increasing and remarriages increasing.  There is an interesting trend emerging here with remarriage families becoming larger by the virtue of the children from one partner living under the same roof as that of the other partner’s children.  With that come a change in buyer behaviour and budgets are reorganised, previous purchase trends change and new patterns of expenditure materialise.  With that invariably comes a change in supermarket shopping basket and budget.

The High Street

It is true that the High Street is shrinking as choice of outlet decreases? If so could you argue that what is over looked by the pundits is that the consumer has increased choice?  Today’s supermarket has more goods per SKU than any supermarket previously.  Our ability to pay has increased significantly. Where we choose to shop is more diverse and when we choose to shop is changing beyond all recognition.


How will the modern retailer manage this changing world?

At Big River we are asked on a daily basis what is the single most important thing I can do for my team. How can You help them achieve their goals and aspirations.

Our response is always the same:  listen to your customers. They will tell you where you need to be.  Once you have understood this, then you can shape your team and drive your business.


As a stakeholder in your business you will have a clear understanding of your market, the competition the go – to market proposition, your supply chain, terms and conditions, your cost base and your profit margin.  Research and development will play an important role in your future success as will macro economics and global business intelligence.  This last point not only applies to your markets but that of your customers to.  You will need to have an appreciation of the issues your clients are facing and how your business can address, some  if not all, of their needs.


It is equally important to have an appreciation of who is who within your market, your competitors market and that of your core clients. As we know it is easier to lose an existing client than it is to find a new one.  The investment required for a new customer, typically breaks even within the first 18 months of any contract.  The cost of sales has to be recuperated within that time frame, to make the new client relationship profitable for all.


Technology can streamline a number of internal processes, however it is the people you employ that determine the final outcome of any business touch point.  We have all heard the story of the medieval king who is fighting a fierce battle with his arch enemy to gain more territory.  The sky is full of arrows and spears as both armies launch a fearful avalanche of medieval weaponry The King is seen directing the battle in front of his tent when his servant timidly approaches trying to interrupt the King.

The King dismissed the servant with the words ‘Not know…can’t you see I have a battle to win’

What the King doesn’t see is the salesman proudly holding a new machine gun which would have given victory to the King, saved the lives of his soldiers and reduced the cost of war.  The return on investment would have been immediate.


It’s important to be aware of your surroundings and to appreciate the subtle changes in circumstances that may influence the eventual outcome.  Some people are born with this sixth sense but many of our most successful entrepreneurs have learnt these skills.  Your work force is your most valuable asset.  This is a cliché I here time and time again. But is it a cliché because it is over used or is a cliché something that makes an obvious point that we subsequently ignore.

In this era of instant communications our workforce needs to be sensitive to several environments simultaneously.  In today’s world we need to have an effective multi skilled workforce to build a trusted global business.

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