Jerry Lockspeiser: Liz Truss has gone, but was she right?

By Jerry Lockspeiser

Published: 24 October, 2022

"How is the electorate feeling? Anxious, in a word. Our August optimism score was the lowest we’ve ever recorded.

Net confidence in household finances dropped ten points in a month and that is feeding through to spending expectations. When consumers become cautious, out-of-home food & drink is always vulnerable as it's purely discretionary spend. The current period is no different and this winter will be tough for the hospitality trade. While eating out is the item most people expect to cut back on, consumers are planning to reduce spending across the board. They also expect to save less.

Baby Boomers are the gloomiest generation – possibly because they fear the effect inflation will have on their retirement savings.

Average earners are the most pessimistic in terms of income bands while women are significantly gloomier than men, according to the September edition of Trajectory Newsletter." (Trajectory Newsletter September 2022).

Trajectory monitors peoples’ attitudes and behaviours over time. The results have never been so negative. The observation of Baby Boomer gloom may be especially problematic for the wine trade as this generation are the biggest drinkers.

There are plenty of reasons to be gloomy. (Note: I am a director of media organisation Positive News and prone to half-full glasses). Climate change happening in front of our noses, the multifarious awfulness of the war in Ukraine, and a recently departed Prime Minister of outlandish unsuitability for the role don’t provide a positive back drop for the wine trade to operate in.

I have just read Mike Veseth’s (aka The Wine Economist) latest piece entitled ‘Storm Clouds Ahead for Global Wine Trade.’ He outlines the huge disruption coming from both the supply and demand sides of the market. We know it too: just about every sector of the UK wine trade is experiencing sales in retreat.

James Bayley reported in Harpers (17 October) on Lumina Intelligence Eating & Drinking Out panel’s findings of a decline in both penetration and spending across the on-trade; and a 12% decline in restaurant spending reported by Barclaycard who handle half of all UK credit and debit card transactions.

The off-trade is not escaping these torrid times. With the notable exception of rapid growth from discounters Lidl and Aldi – unsurprisingly proving a haven from the storm of 10% inflation – mass market off-trade retailers are struggling to stand still. Online specialists like Ocado can only dream of the booming sales during the halcyon days (for them) at the height of the Covid pandemic.

Liz Truss’s answer to all this is ‘growth, growth, growth’. Her methods for achieving it were ideologically driven, without regard for the reality of the UK’s immediate needs or circumstances. Had they not been met with howls of disbelief and derision, they would have collapsed the economy rather than producing the results she declaimed – as the markets and many of her own party understood. The social price is almost too grim to think about.

Her complete ineptitude to perform as a politician at the highest level was ultimately the cause of her downfall, but the content of her and Kwarteng’s mini budget built the base. Entrepreneurs and well-paid senior professionals don’t try less hard because the top rate of tax is 45% rather than 40%, as many came out and said. On the contrary, they do recognise that the country needs properly funded public health, education and transport services to provide a population and infrastructure fit for business to succeed.

While her methods were rightly blasted, the idea that ‘growth is good’ is widely accepted, especially in business. I plead guilty. It’s become an unspoken given for most entrepreneurs that we want more customers, bigger sales, higher profits, more market share and all the rest. We don’t often stop to ask, why? Or at what cost? Or whether this lemming-like pursuit makes those in our working network – especially colleagues – happier?

I have met countless entrepreneurs over the years who have followed the growth imperative, making their business bigger, but also ramping up the stress, complexity and demands on their time, and often with little or no more profit – or not enough more to compensate for the negatives. Some downsize again to greater happiness and as much financial wealth as they need.

More than ever, we need to challenge the assumption that the pursuit of increased growth and financial profit are automatically ‘good’. Their pursuit should at least do no harm to the so-called externalities (people, environment, limited global resources) and should increasingly make a positive contribution to them.

Growth without responsibility will shoot itself in the foot by destroying the very things it needs to survive and prosper. It is not impossible to do. Kate Raworth’s book Doughnut Economics sets out how humans need to – and can – live within the world’s resources, a cause championed by environmentalists across the globe. Every business’s growth agenda needs to start with asking why are we doing this, do we need it, who and what will it impact? If we are to grow, we need to be sure it is ‘good growth’ not ‘bad growth’.

There is no time like the present. Business owners can be excused for adopting a defensive mind set in face of serious recession. But as the saying goes, there are no problems, only opportunities. In a shrinking economy, every business needs to do better to keep and win customers.

Two related opportunities come to mind. These apply in good times and bad, but seem especially pertinent during the bad.

First, standing out from the crowd through the clarity and transparency of the company or brand values. When most of the population are struggling to survive and profit is a dirty word, business needs to make itself part of the solution. It needs to be relatable.

Second, a detailed understanding of the customer and what matters to them. Not all wine drinkers are alike, they don’t have the same financial or life situations, nor the same priorities, nor make their decisions on the same basis. Understanding this better can lead to a more customised and relevant approach.

Trajectory’s September presentation highlighted some useful points:

First, ‘simplicity’ – enable customers to understand best value easily. They don’t like hassle in having to work it out. Price Freeze is a very popular message. The drift to supermarket own brands comes from the same stable. This is not only a recessionary point – Wordle, BeReal and the BBC’s Ros Atkins On... all evidence the popularity of short, simple, accessible formats.

Second, ‘seriousness’ – in times like these, people struggling with the cost of living want down to earth seriousness from retailers and brands, not frivolity. Hello Lidl, hello Aldi.

Third, recession changes priorities, but it doesn’t eradicate concerns. Social, environmental and ethical issues may currently be less front of mind for many, but they will come back.

People have not stopped caring. They just have more immediate concerns in today’s ‘heating or eating’ Britain.

Despite recording an all-time low in people’s confidence regarding the nation’s economic situation and their own household finances, Trajectory also noted the national coming together and rallying round the flag in sadness at the death of the Queen. People respond emotionally as well as rationally. We can help our own businesses and the concerns of our customers by remembering this – not least when the time comes to think about our growth plans.

Jerry Lockspeiser donates his fee for this column to The Running Charity in support of their work with homeless young people.

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