Leahy tests the retail limits

SIR Terry Leahy is one of the few chief executives in Britain who can afford to disregard criticism of the group's corporate governance.

With results such as those that Britain's leading supermarket has just produced, fund managers are not going to be too bothered about his two-year contract and David Reid being chosen from among the group's executives as chairman.

Tesco has managed the impossible task of firing on all cylinders across all marketplaces at the same time. All the measures - from like-to-like sales to market share - are moving in the right direction.

The only fear that Tesco can have at present is that the Competition Commission, currently looking at the Safeway bids, gives the green light to expansion of Wal-Mart-Asda, the only group that can possibly challenge its hegemony.

Other European retailers, including Carrefour and Ahold, must be looking on aghast at the speed of Tesco's expansion. The group is fast becoming the largest retailer in the emerging markets of the new Europe from Hungary to Poland.

The earnings contribution from overseas - Europe and Asia - is just shy of £100m.

What makes Tesco better than the rest at present is that when it begins a project, it carries it through. Having identified that it needed a clothing brand to take on Asda's George, it created Cherokee - and it is soaring away.

While others backed away from the internet businesses Tesco stuck with it and earned itself £11m in this area and a further £28m from its financial activities. It now has 4m customer accounts. Enough to send a shiver up the spine of some of the banks.

There is a degree of luck in all of this, including the long, hot summer, which saw picnic goods and water pouring out of its UK shops.

But the synchronised success is very difficult to achieve. For a time in the 1990s, this is just what Marks & Spencer looked like.

Then hubris set in and the management started to look shop soiled. Re-invention is the key to successful retailing.

Tesco under Leahy has done that, but it will become ever more testing.

Housing obsession
HOUSE prices have long been the staple of Middle England's dinner tables.

This preoccupation is now so formalised that they have become the most monitored statistic of our nation - more closely watched than education, health, trade, inflation and anything else.

Deutsche Bank points out that a house price index will likely flicker across computer screens in the City once every two and half days.

As if there were not enough raw data this week, we saw the birth of the government's own index - and it showed that prices climbed 14.1% in August.

That places it halfway between the Halifax and Nationwide and well above the Hometrack index, which at present shows only a 2% rise.

With the current volume of house price data, the Bank of England cannot complain it is in the dark on property. Indeed, the opposite is the case.

A combination of firm house prices, debt accumulation and sticky inflation almost certainly means that UK interest rates at 3.5% have reached the bottom.

This is confirmed by Monetary Policy Committee member Steve Nickell, who argued that surveys pointed to a strong recovery. But he played down fears of record debt levels.

Latest inflation data showing prices rising at 2.9%, above the Bank's target of 2.5%, were seen as disappointing.

A sign of recovery, however, is that retailers in the competitive clothing sector are finally making higher price rises stick.

Bad news for consumers, but good for the buyout firms who have taken so much of the sector private.

Sky master
BSkyB is one of the few top-class companies to emerge from the digital revolution. So the succession at the company, where Rupert Murdoch is chairman and holds 35% of the shares, is of intense interest to fund managers.

It now looks as if the skids are under Tony Ball, whose contract expires in May, and who recently cashed in £9m of share options.

Murdoch would clearly like to see his son James at the helm and a slice of his life's work in family hands. But the City, having supported Sky through years of losses, would clearly prefer a professional manager in charge, just at the point that profits are taking off.

But it would be foolish to bet against Murdoch Senior getting his way.