With Debenhams and the parent company of Argos due to report this week, more bleak times are expected by retail analysts.

With consumers being hit from all angles with higher domestic energy prices, increased food prices (which thankfully are showing signs of moderating) declining job security, and decreasing stock and house prices, it’s no wonder that the high street is gloomy. Definitely gone are the boom days of only a couple of years ago when everything ahead looked plain sailing to most.

The trading update last week from Travis Perkins showed just how bad the UK housing market getting. The retailer of DIY products and supplies for the building trade said that activity had virtually ground to a halt as it issued a profit warning.

Investors are eyeing Home retail group, owner of Argos and Homebase for a trading update on Wednesday. In the second quarter, heavy like for like sales declines of 5.8% and 8.3% were announced for Argos and Homebase respectively.

Terry Dud, the Chief executive said at the beginning of September that the performances were indicative of a “difficult consumer environment”. Consensus forecasts were put at £121m for the half year.

Debenhams on the other hand gave the market cause for celebration in September with its most recent update with only a 0.9% fall in like for like sales. Debenhams will update its results today with investors increasingly worried about the company’s £1bn debt pile, accrued after being floated by a private equity firm in May 2006.

Should trading conditions deteriorate further, analysts are worried that the groups banking covenants could be in trouble…and that is where the real danger lies for a lot of companies in this credit crisis.  If Banks can’t restructure their debts or have problems accessing capital from banks who are themselves worried about their own solvency and long term prospects, then the credit crunch could inflict a mortal blow on otherwise sound businesses. Let’s all keep our fingers crossed that this doesn’t happen.

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Tags: Credit Crunch, Global Credit Crisis, Housing Market, Investors, Terry Dud, Travis Perkins, UK Banks

The £500bn ($875bn) bailout in the UK of the banking system has implications for the people of the UK, but probably not the tax payers. The deal is based on the Swedish model that proved successful in the 1990s when the Swedish government took an equity stake in several banks and later sold the shares at a profit. It’s likely that the same result will follow in this banking deal. Gordon Brown urged World leaders to follow Britain’s lead and do similar deals to try and unfreeze the credit markets globally.

The deal however, has implications for those on fixed incomes and those with savings. Let me explain. The money has to come from somewhere…it will likely come from printing presses, hence the pounds fall against even the dodgy dollar over the last 2 days. Per capita, the UK bailout bill is about 6 times greater than the US bailout bill…ouch! Once the money has been created, it will devalue all the other currency in existence in the UK. This means inflation and heartache for holders of British pounds. So while details of the plan are eerily sketchy, they look similar to Warren Buffets deal with Goldman Sachs, the British tax payer gets preference shares  and dividends for as long as they hold the shares. They also get to call a few shots at the top regarding executive and  To get an idea of how much equity the initial £25bn will buy in British banks, it’s over half of the current market value of the top 4 banks in the UK right now.

That means that the government has in essence taken over the banks and along with the levers of political and legal power, the UK government now has at it’s disposal the levers of retail financial power. Does this make anyone else uneasy? Hopefully, not tyrannical or dictatorial individuals will find their way into number 10. If they do, it will be awfully hard to get rid of them!

The signs aren’t good, the markets have still plummeted in the wake of this bailout…confidence doesn’t look to be restored…in fact the opposite seems true.

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Tags: Banking, Global Credit Markets, Gordon Brown, Investors, UK Bailout, UK Banking