The grouse shooting business is feeling the crunch
Grouse shooting is big business. The industry is worth £1.6bn to the UK economy. It generates the equivalent of 70,000 full-time jobs, while ensuring the management of two-thirds of the UK's rural land.
But like almost every other British business, it’s under pressure. Costs are rising. Both fuel and ammunition are getting more expensive. What’s more, the weakness of the US dollar – even allowing for the recent bounce - has pushed the cost of a day's grouse shooting in Scotland to around $13,300. That’s enough to make even high-rolling American hunters think twice about whether they can afford another trans-Atlantic trip.
However, the real concerns in the grouse shooting world run rather deeper. Much of the demand for shooting comes from the City and corporate business. So if the Square Mile’s hot shots aren’t gunning for a day on the moors, that could be bad news for shoot organisers.
This year’s season will probably be OK, says Christopher Graffius, director of communications for the British Association for Shooting and Conservation. Most bookings were paid for at the beginning of the year, “before the credit crunch really hit.”
Yet a study by specialists Fox Harris has found “some signs of softness in the market”, says Martin Waller in The Times. One unnamed banker told him that “in today's climate, taking large numbers of clients to shoots costing as much as £30,000, was probably a non-starter on PR grounds”. Another agent spoke of a dearth of corporate customers, and warned that some who’ve paid deposits may walk away. “We're aware of shoots normally full and difficult to get into that are now offering days. There will be some days coming back on the market discounted.”
“It’s not going to make any difference for the guys that come in their own private jets, but certainly at the lower end of the market there seems to be a bit of a slow-down”, says Russell Hird, who runs grouse-shooting expeditions on the Isle of Lewis.
Other birds may find they have fewer bullets to dodge this season. John Bingham in The Telegraph reports that “pheasant shooting - which gets under way in October – [is] thought to be particularly vulnerable to the downturn,” with “the number of birds expected to outstrip the number of shooters”. Even clay pigeon shooting has become more expensive due to the rising cost of metals.
Now, you may not care that much about the troubles of the City’s amateur hunters. But what this all demonstrates is that the view that the ‘crunch’ won’t affect the ‘top end’ is complete nonsense. When economies turn down sharply very few people escape unscathed.
And investors in premium brands are starting to realise that.
Why now's the time to sell luxury goods stocks
The FT revealed last month that inflation in the luxury goods market has halved in the last year, “indicating that the wealthy are watching the pennies as much as anyone else”.
Even down in Saint-Tropez, retailers are reporting a “dramatic drop in takings as the number of yachts dropping anchor is down 50%”, reports AFP.
The rich are having trouble paying their debts too. “The wide-ranging effects of the US housing downturn are highlighted by the worsening of credit quality in American Express’ affluent card member base,” wrote Oppenheimer analyst Meredith Whitney in a recent client note.
It all spells bad news for the luxury sector. In the year to July, the sector and luxury-brand dedicated funds fell between 15-20%, reports Funds Europe. Luxury goods makers are pinning their hopes on the newly wealthy in emerging markets. But decoupling has already been shown to be a myth, as China’s economy slows alongside America’s. Eastern millionaires will be no more inclined to keep spending than their counterparts in the West.
It’s yet another sector for investors to avoid – and if you do hold any luxury goods stocks, now would be a good time to sell them.
With the economic downturn picking up steam, prospects don’t look great for many sectors, in fact. But MoneyWeek contributor Stephen Bland reckons investors should take a longer-term view of things. To read his take on why you shouldn’t be worrying too much about the current volatility, see: Don't panic: the world isn't ending.
Turning to the wider markets…
UK shares recovered, with the FTSE 100 index closing 49 points higher, or 0.9%, at 5,497. Miners led the rally, with Antofagasta, Anglo American and Kazakhyms all up 5%. But banks generally continued to suffer, with Barclays down 1.5% on fears that more credit write-downs will be needed, though Royal Bank of Scotland managed to hold its price level after a Goldman Sachs recommendation. Housebuilders dropped after Bellway’s downbeat trading update, which hit Taylor Wimpey 11%, Barratt Developments 8% and Persimmon 4%.
Shares in Europe also picked up as the German Xetra Dax nudged up 0.3% to 6,442 and the French CAC 40 improved 0.4% to 4,421.
US stocks bounced off early-session lows, with the Dow Jones Industrial Average adding 83 points, or 0.7%, to 11,616. The wider S&P 500 gained 0.6% to 1,293 and the tech-heavy Nasdaq Composite advanced 1% to 2,454.
Overnight the Japanese market recouped 66 points, 0.5%, to 13,019, though in Hong Kong the Hang Seng eased 321 points, 1.5%, to 21,072.
This morning Brent spot was trading at $112, spot gold at $788, silver at $13.10 and platinum at $1440.
In the forex markets this morning, sterling was still weak against the US dollar - falling for its eleventh successive day, its longest losing streak for 37 years, according to Bloomberg - trading at 1.8555 and against the euro at 1.2599. The dollar was trading at 0.6789 against the euro and 110.41 against the Japanese yen.
And this morning, recruitment company Michael Page has rejected a 400p-a-share (£1.3bn) bid from rival Adecco, saying it “materially undervalued” the company.
Our recommended article for today...
How the old guard continues to make economic policy
- Economic trends don't just come and go as governments change. And the Bush administration's financial bail-outs will be difficult - perhaps impossible - to reverse. In the long term, the dollar will suffer. To find out more, click here: How the old guard continues to make economic policy 
No comments:
Post a Comment