Belfast Telegraph

Why pound shops may become a spent force

You can't help but notice the proliferation of 'pound shops' on our high streets these days. The inevitable effects of an economic downturn mean high-end shops disappear, to be replaced with the type of retailer which tends to flourish in difficult economic conditions. Some say they're a blight on our high streets but commercial property owners are only too glad to have vacant shops filled.

Despite this, the detractors may take some encouragement from the fact these discount stores may soon be forced to change their names. If inflation keeps rising at its current rate then there will be very little you can buy for a pound.

The UK Consumer Prices Index measure of inflation rose from 4% in January to 4.4% in February, a 28-month high. That might not sound like much but it sends shivers down the spines of the Bank of England's Monetary Policy Committee.

Anything over 2% and the governor has to send a grovelling letter of apology to the chancellor to explain why he has failed to keep soaring prices in check.

Mervyn King's PA must have a standing order with the Bank's stationary supplier recently because over the last year that 2% barrier has been breached pretty much every month.

The soaring price of oil is partly responsible for the inflationary pressures, as are price increases for clothing and footwear. Mr King has probably tried to blame the oil market for the last couple of months in his letter to Mr Osborne so maybe this time he'll turn his ire on shoes.

In any case it puts more pressure on the Bank to lift interest rates in an attempt to temper the price rises. All very well in theory but not good news for the companies which aren't able to take advantage of higher prices. The chancellor may not be in much of a mood to listen to excuses. He also found out yesterday that public borrowing hit its highest level in February since records began in 1993.

There's not much chance now that he'll manage to keep borrowing much under the £148m target in 2010/2011 as many people had hoped for.

This just before he presents his latest Budget to parliament. It's enough to make you feel sorry for him - but don't jump the gun just yet until you see what he's got to say for himself in the Budget.

If he's not careful he'll only accentuate the rise in prices and slow the economic recovery.

If that's the case then there'll soon be "£10 shops" which none of us will be able to afford to shop in. At least the sign writers will be happy.

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