When Sports Direct issues a profit warning we should all worry. The price slashing sporting goods retailer is one of the most telling barometers of both high street retail spending and general consumer mood. If people aren’t buying Mike Ashley’s incredibly cheap leisure kit then they won’t be buying much else at anything near full retail prices. They’re also likely to be spending less at weekends, doing less sport and reducing outside leisure and gym activities too. Clearly consumers are closing the hatches ready for a coming storm. Throw in all the other high street profit warnings, collapsing currencies plus stock market and commodity falls and it’s beginning to feel like 2008 all over again. And that’s before the story about China’s hidden loans to emerging economy infrastructure projects properly unravels. The world’s largest economy could be in an even worse pickle than we thought.
George Osborne knows all this. He’s anything but daft and last week’s remarks about not getting complacent over UK growth were a veiled warning that things are on the skew again. The only good news is the continuing catastrophe in oil prices that’s helping keep costs and inflation down and disposable income up. While we should all give thanks for having the most affordable transport costs for years the loss in North Sea oil tax revenue means that the Treasury is a billion quid light on its projections. And that’s why the Chancellor is sending out strong signals that he wants to claw back some of that tax in an increase in fuel duty in the next budget. Treasury insiders have told us a hike is on the cards and to get ready for the worst.
Well at FairFuelUK we think that would be a very grave mistake. And this is because we see something that George may have missed. The oil price isn’t leveling off and is showing every sign of falling below the historic $30 a barrel watershed within the next few weeks. Iran and Saudi Arabia have been sabre rattling of late and that sort of geopolitical tension would normally see oil traders scurrying to battle the price up. But they haven’t been able to massage the market simply because there’s no demand. Global inventories are awash with crude, petrol and diesel and there isn’t enough space on the planet to store it all. OPEC has lost its grip on the market so can’t stop the slide, nobody wants to buy the stuff and, critically, worldwide demand for oil and petrol has slowed to a very worrying trickle. And if global demand is slowing that means economic activity is as well and that’s a very bad thing indeed.
We think there are clear signs that the UK will fall back into recession in 2016 and the last thing we need are higher transport costs. Making a dent in consumer spending power right now by increasing duty would be both reckless and dangerous. There are very dark clouds on the horizon Mr Osborne so make sure you watch them carefully and please don’t do anything rash.