Birmingham Post Editor Alun Thorne catches up with Sainsbury’s boss Justin King to ask about the challenges running one of the UK’s largest supermarkets and discover his first thoughts on the new coalition.
One of the defining moments of the recent General Election campaign was when some of the country’s leading business figures turned on the Government over its plans to increase National Insurance.
An already fragile relationship with business finally fractured when the bosses of a number of the country’s largest firms signed a letter to a national newspaper backing David Cameron’s claim that the increase would effectively be a tax on jobs.
There followed accusations that the attack was politically motivated – it is believed that the brains behind the letter was Next boss, arch Tory and future peer Simon Wolfson – but with so many non-affiliated signatories, the letter became one of the final nails in the coffin of more than 13 years of New Labour rule.
One of those who put his name to the letter was Sainsbury’s boss Justin King, who has spent the last five and a bit years transforming the company and clawing back market share in one of retail’s most competitive sectors, and he remains adamant that the previous Government’s plans for NI would have damaged the recovery – and it has nothing to do with politics.
He said: “It is interesting that the debate about National Insurance focused around the election but I went on Question Time in October 2008 and NI came up then and I said then that making employing people more expensive when the most important thing is to get people in jobs seemed to me a lunacy.”
He added: “I don’t think businesspeople can nay say everything that the Government proposes otherwise they are just sitting on the sidelines and not helping.
“My particular focus was National Insurance and elsewhere I think the overall focus needs to cutting expenditure rather than raising taxes – the bias needs to be that direction certainly. Ultimately we need to stimulate the economy and the example from around the world – particularly the Canadian model – is cuts in expenditure making up 80 per cent.”
And the 49-year-old believes that while the coalition is barely a month old, the mood so far has been a refreshing change, particularly in its approach to tackling the deficit.
“Our results came out a few days after the election and I said then that there had been more candour in four days about tackling the deficit than there had been in the four weeks running up to the vote,” he said.
“The election campaign just didn’t provide the right platform to discuss the significant size of the cuts that would be needed. In our personal lives we have to make difficult spending decisions and it doesn’t take long to realise that if £1 in every £4 you spend is borrowed then you are going to spend less.
“The most encouraging aspect of the coalition is they are having to lay out their plans much more clearly and well in advance.
“In business we all lay out our long term plans and then set out the detail for the following year whereas that never really happens in politics. The coalition however has had to set out clear objectives and that is to be welcomed and is very helpful to business.
“I can just about remember the last coalition of the 1970s and the various elections over such a short period of time and I just don’t feel there is an appetite for that kind of disruption this time around.”
But while it is important that the Government tackle the growing deficit, Mr King also believes that there are other measures that the coalition needs to take to get the UK moving again.
He said: “The other thing is not just about what the coalition does in the Budget. There needs to be a real focus on the business environment for the small, medium and large business who will regenerate the economy. There is talk about what the Government invests in the economy but the only money it has is ours which has already come out of the economy.
“Creating the conditions for enterprise to create jobs is the way forward. Vince Cable has talked about a one in one out approach to reducing red tape – what about a one in, two out approach? Lose one, and lose another for free.”
In terms of his own business, Mr King has seen Sainsbury’s return to form in recent years – the last numbers posted for the year up to March saw pre-tax profits up 17.5 per cent at £610 million.
However, after like-for like sales for the 12 weeks to June 12 up only 1.1 per cent – aided by higher VAT – and rival Tesco announcing just 0.1 per cent growth in food sales for the first quarter of this year, he is under no illusions about the challenges that lie ahead.
He said: “When I joined Sainsbury’s in 2004 there were very significant challenges – the company had been in decline, not for a year or two as was suggested, but for 10 years where the company had been losing market share and going backwards.
“There were some fairly significant issues to address and so in the early days I guess it was a business turnaround strategy up until 2007-08 when a platform had been created for further growth. That is why last year’s results were particularly pleasing as we saw growth despite many people feeling the economic downturn and proving some of the sceptics wrong certainly has its own reward.”
He said that while last year had not been so bad for many consumers, the rising cost of fuel and energy as well as the consequences of the public sector squeeze would have an affect. He said: “In our results we saw food sales up 1.7 per cent but fuel sales up more than five per cent as filling up your car when you came to do your shopping became more expensive. I think everyone is going to feel the pinch in the coming year.”
l Hear how Justin King revived the fortunes of Sainsbury’s and help to raise money for Birmingham Children’s Hospital at a special breakfast event at Aston Business School on June 18. Tickets for the event – supported by the Birmingham Post, Birmingham Chamber and Aston Business School – are £10 with an optional £15 donation to the hospital. Details at www.inaidof.org