So far the King strategy has been to restore sales growth and price competitiveness whatever the cost

So far the King strategy has been to restore sales growth and price competitiveness whatever the cost. The next stage, which is restoring the margin, will be much less easy.He’s also saddled with the age old problem for Sainsbury that it still pays far too high a dividend, in part to satisfy the controlling family’s demand for income. Any offer from WPP will be in conjunction with the private-equity group Hellman & Friedman. Sir Martin Sorrell’s WPP is barred from bidding alone because of the numerous conflicts of interest in acquiring Aegis’s media-buying client list. Aegis jumped 6.75p to 127.5p as traders piled in, hoping to make a quick buck.

Growth this year has been only half that expected by the Treasury. If the pincers tighten, do not expect much of a pick-up in growth next year.. Aegis shares have been in retreat for the past month but investors returned to the stock yesterday amid rumours of a 140p-a-share bid for the media buyer from WPP. The danger is that he will force us to tighten our belts even further just at the moment when we conclude it might be a good idea to back off some debt. But there is nothing it can do about the fiscal squeeze, nor should it want to. Tax policy is nothing to do with the Bank.We will know more about how the Chancellor intends to cope with his fiscal problems in the forthcoming Pre-Budget Report. In the coming couple of years, the Bank will have to nudge rates down to minimise the monetary squeeze and, fortunately, it has room to do so.

And as the Bank’s Governor, Mervyn King, said yesterday, rising taxes are already squeezing consumption.So there is a pincer movement on consumers: the need not to borrow more (and maybe pay back a little) on the one hand, and higher taxation on the other It is a monetary and fiscal squeeze. These coincide, interestingly, with periods when house prices have fallen in real terms. We are again in a period where house prices have more or less stopped growing and look like stagnating for a while. As you can see, there have been only three periods when consumption has not grown: in 1975, in 1981 and in 1990-92.