Speech by: Lord Mandelson
Venue: British Retail Consortium Annual Dinner, London

Introduction

It is of course a serious time for Britain. Over the last two years, we’ve been through some of the toughest retail trading conditions for decades and lost some familiar names from the British high street.

The Government has backed you up in some important ways, and, when we look back our policies will have been seen to have helped make the recession shorter and shallower. The VAT cut has helped support demand and I know you’ve made representations to the Government about the timing of when the cut should end.

Through the Enterprise Finance Guarantee, just under £120 million has been lent to retail companies who would otherwise not have received bank funding.

As the CBI has just argued, at a time when our economic prospects are improving, this is not the moment to pull the Government’s support away from the economy. Given the lingering impact of the financial crisis and the continuing tight credit conditions the CBI is right to say that the fiscal and monetary stimulus are both still needed. They are in good company: across the G20 economies there is unanimity that early exit from the stimulus measures would put the recovery at risk. Our big immediate challenge is locking in the recovery, not wrecking it.

Luke is of course right that we need a long term policy for rebalancing the public finances. But growth is the best counter to recession and the best antidote to debt. And that means maintaining the present course: underpinning demand in the economy, sorting out the banks, stopping unemployment becoming long term joblessness, especially among the young, and coordinating these policies internationally and in the EU. The Government needs to support investment in our future skills, technologies and growth markets and sectors from where many future jobs will come.

Reducing the financial deficit is not a question of if, but when and how. We all know that. But an approach to rebalancing the public finances that is too early, too hasty, or too indiscriminate would undermine the very growth on which locking in the recovery depends. It would send unemployment and its costs soaring, thus causing the deficit to spiral, rather than cut in half in four years, as we have announced our intention to do. Professor David Blanchflower, the recent member of the Bank of England Monetary Policy Committee, has warned of the acute dangers to employment that would arise if spending – public spending – cuts are made too early and if the fiscal stimulus is withdrawn straight away. Frankly, those who advocate this course are either economically illiterate, or irresponsible, or both.

We all recognise that the next few years are going to bring real constraints. I have no more time than you do for airy-fairy wish-list politics. But neither do I have any time for shallow analysis or short term headline grabbing.

And as a frontline sector that depends on demand and growth more than most – retail is right to challenge government to get this right. I accept that challenge. Tonight I want to recognise the role of this critical sector and lay down some challenges of my own to you, on low carbon and skills.

The Retail Revolution:

I got pretty used to hearing from the BRC when I was EU Trade Commissioner. Because this is an industry that is built on trade, and global trade in particular. Globalisation has transformed your supply chains and the expectations of your customers.

The best British retailers have seized on that change as a driver for diversity and growth. They’ve built strong national brands, then exported those brands around the world. You now employ one in ten British workers.

I know that you spend a lot of time and money working out what your customers want and think. And it’s worth looking at the next decade through their eyes for a minute.

They’re going to put a greater emphasis on paying down personal debt and thus value for money. Their whole idea of personal service and convenience is changing driven in part, but not totally, by the internet. They’re bringing all kinds of other factors into their choices as customers: the environment, ethical sourcing and animal rights standards.

And in part because retail is often being done in ways other than over an old-fashioned counter, they’ll want high standards of service and client care. It does seem to me that for all the scale of big retail in the UK, the customer remains firmly in the driving seat. And that’s exactly as it should be.

Our basic challenge in government is to make sure that you have the flexibility to respond to that demand, and to keep on innovating. And yes Luke, I agree with you not to place an intolerable level of regulation on you that is not sufficiently tested and justified.

A big part of that is just working to keep markets open and competitive, so you can source goods and trade effectively; and on establishing a modern, digital infrastructure you and your customers rely on. I feel very passionate about that not only in my Department, but in the Government as a whole.

It also means a consumer law framework that is modern and transparent, as we argued in our recent Consumer White Paper. We’re working with you on making sure that you don’t have to be a lawyer to understand your consumer rights in this country.

And while I obviously hear Luke’s messages on the retail environment, it is worth remembering that the UK has probably the most open and competitive High Street in Europe, backed up by a flexible labour market and some of the lowest business tax rates in Europe too and that’s how we want these conditions to remain.

Growth through a low carbon future:

Of these customer expectations the low carbon transition is perhaps the most far reaching. Because it is more than just a customer preference – it’s a social imperative. We don’t just need to tap into green consumerism, we need to create and encourage and nurture it. Retailers have a major part to play both as adopters and advocates of low carbon processes and behaviours.

Initiatives like the BRC’s Better Retailing Climate are making a difference, and I welcome that. I want to harness that energy and experience as much as we can.

The 1 in 4 of our working population, who have retail experience add up to a huge store of low-carbon literacy that we can inject into our wider economy.

That’s why we’re going to work on a Low Carbon Action Plan for Retail. And I’ve tasked BIS officials to work quickly with you and our colleagues at DEFRA to develop this plan.

Investing in our people

Finally, I want to say a word about your other key constituency. Your workforce. It’s not really an exaggeration to say that the prosperity of the UK is built on productivity. With margins like yours, that is hardly news to any of you.

But we need to look at these issues from more than just the bottom line. Productivity is ultimately about skills.
Skilled workers are more motivated, upwardly mobile and loyal. And with almost 3 million employees, the UK retail sector is one of the most successful in creating employment opportunities for the long-term unemployed, older people and flexible workers. I commend the way you have tapped into these forces in our workforce.

It’s got a long, impressive history of people working their way from shop floor to boardroom, from market stall to multinational. Probably no other industry in the UK can match that record.

Over the last few years, we’ve had bankers without banking qualifications. But I find it hard to imagine a retail CEO who didn’t know their way round a shop floor.

So I want to lay down my second challenge of the night: that you work with us to enable more people to progress through a career in your industry. And you ensure that, across this sector, a job in retail is a ladder up.

I know there’s already a lot of good stuff happening such as through apprenticeships and the new retail qualifications framework.

But we need more businesses, big and small ones, to get involved – to recognise that there are no diminishing returns on investment in staff skills.

And in the coming months, Government will be launching our new Skills Strategy, setting out how we aim to meet the skills needs of this and other sectors in the future. The skills that underpin the retail sector are of course part of that.

Conclusion:

Retail is on the frontline of this recession. Thousands of businesses are working hard to respond and survive, drawing on the innovation and flexibility that’s helped them to succeed in a tough, changing retail environment.

Together, we’ve got to build on that strength for future success – increasing skills, developing a lead in low carbon and maintaining a business environment that supports the creation of wealth and jobs. And I look forward to realising this sustainable future with you in the months and years to come.

Thank you.