Consumers convinced we are in a new age

IT IS NOT just the British Government which is about to set out on a new borrowing binge. The people, not wishing to be outdone, are doing the same. Bank of England figures show that in October total lending soared to £6.5bn, the highest on record.

Most of this is accounted for by a resumption of mortgage lending, but other borrowings are also on the rise, which may not be that surprising in the run-up to the holidays.

What is really fascinating is that household debt has reached £717bn, or 107% of disposable income. As a nation we seem to be moving in the direction of America, where living off credit is a way of life.

Simon Rubinsohn, of Gerrard, notes that since 1998, debt secured on homes has jumped by one-third and unsecured borrowing by 55%. The Shakespearean notion of 'neither a borrower nor a lender be' seems to have been lost over the last five centuries.

At present, people are able to live with higher borrowings because the cost of servicing debt has fallen to 7.5% of take-home pay from 15% in early 1990 - the final burst of the last boom. Increasingly it looks as if households and the financial institutions which lend to them have convinced themselves that we are in a new age of low inflation and interest rates, when absolute debt levels are no longer important.

Economic circumstances are changing. After the Pre-Budget Report, the Government will be borrowing again soon, potentially quite heavily should it want to get off to a brisk start in re-funding the health service. As a result futures markets are already predicting 5%-plus base rates late next year, which could put more pressure on personal balance sheets. This will be especially true if unemployment starts to rise.

Maybe all those speeches from the Bank of England (the last from Ian Plenderleith) extolling the virtues of the Old Lady's role in maintaining financial stability have a purpose after all.

Waiting on Burberry

GUS is proving to be a good, defensive company in a difficult global environment. The biggest risks to the group in the first half came from its Experian credit data business and from Burberry.

Experian, its biggest division, managed to raise profits despite America's lurch into recession in March of this year and the events of 11 September. Burberry, run by Rose Marie Bravo, remains the jewel in the crown.

Despite the general malaise in luxury goods, as the global economy slows, Burberry is in fine fettle, with pre-tax profits racing ahead 42%. Demand for fashion accessories in particular is boundless, and as a recent visitor to Tokyo I can testify that it is a brand which appears able to defy gravity in a very unpromising atmosphere.

GUS remains preciously cautious about the Burberry float. Lift-off is still promised before next June, but the City is impatient for the promise to be fulfilled. If it can burnish sales, expectations of raising at least £1bn could well be increased.

Sensibly, GUS is also focusing on upgrading Argos where like-for-like sales were up 13%. The profit contribution from the traditional home shopping businesses, the core of Great Universal Stores, has stabilised after a long fall. It is plain that Argos is a good substitute and a great deal of investment is going into upgrading stores, opening new ones and improving the supply chain.

Chief executive John Peace is sticking with GUS's e-commerce ambitions, if at a much lower key. The Wolfson dynasty has left its legacy in careful hands.

Patrician power

THE patrician old guard in the shape of Sir Patrick Gillam, 68, and Lord Stewartby, 66 - formerly Bernie Stewart, coin collector and Tory party hack - have quite rightly seized back control of Standard Chartered from the foreign interloper Rana Talwar.

The fact that 51-year-old Talwar spent most of his career in international banking whereas Gillam and Stewartby have done everything but, never seems to have crossed their minds. In the traditional way of Britain's boardrooms, Talwar, whose performance as chief executive has not been questioned, is leaving with a £3m bag of swag.

Behind all this is a clear debate about Standard Chartered's future. Although it is in some of the most promising neighbourhoods in the world, it lacks capital and muscle in markets where its main competitors are HSBC and Citibank.

The sooner that Barclays, Citibank et al make a swoop and send the crusty old lags Gillam and Stewartby on their way, the better it will be for all involved.