Sharper elbows needed at the 'nice' supermarket

The boardroom reshuffle at Sainsbury's is a valiant attempt to inject some dynamism into a company that is widely felt in the City to have lost its way, but it needs to go a lot further to make a real difference. That much was clear from Sainsbury's share price, which edged down a penny yesterday. As far as the market was concerned, it was a damp squib.

The central criticism is that David Sainsbury has not really split the roles of chairman and chief executive. The new structure will still see Mr Sainsbury remain as executive chairman while the two chief executives of the main subsidiaries will report to him. Creating a single, group chief executive would have been far better.

To be fair to Sainsbury's, perhaps yesterday's changes are a prelude to just that. Certainly, Dino Adriano, who will run the UK supermarkets, looks to be the coming man. A Sainsbury's lifer through and through, he has impressed at Homebase and risen steadily through the ranks. True, he is not regarded as "the Rottweiler of Stamford Street" like Tom Vyner, Sainsbury's soon-to retire deputy chairman, who strikes fear into the hearts of suppliers with his fearsome buying technique. But he has developed a reputation as the kind of aggressive manager the board needs. Some say Sainsbury's has become "too nice to win" in the sharp-elbowed world of supermarkets, so the promotion of people such as Mr Adriano, who are not afraid of a scrap, is a step in the right direction. Another welcome attribute is that he is a good general manager capable of looking at the big picture.

Set against this view of the changes, word is that Sainsbury's tried to persuade Mr Vyner to stay on longer. This suggests that the group would sooner have given its new boy longer before thrusting him into the limelight.

Now Sainsbury's is addressing its management structure, it needs to inject more spark on the supermarket floor and bite back at those upstarts Tesco and Asda.

Mr Sainsbury was already talking about a more aggressive trading stance yesterday. That means that if its January price promotion proves successful, it could be extended and become a regular feature - February Savers, March Savers and so on. There are also signs that a new loyalty card is actively being considered. So far, so good, then. But more must follow.

Two cheers for Norwich on bonuses

Two cheers for the announcement from Norwich Union that it won't be cutting bonuses on its with-profits policies this year. It now looks as if the scare about endowment policies failing to generate enough money to pay off the mortgage may be over. But there is only one cheer for endowment policies as a way to finance the purchase of a house if, and when, the market revives. The ratcheting down of bonuses that started five years ago seems to have come to a halt. Current levels are broadly in line with prospective total returns - roughly half of what was chalked up in the 1980s.

In the low-inflation environment of the 1990s, this translates into respectable, if unexciting, potential pay-backs from policies. Over 10 years, a person with a Norwich Union with-profits policy will walk away with a compound annual return of just over 10 per cent. Those with 25-year endowments stand to gain 12.5 per cent a year. Not bad, all things considered. Enough at any rate to meet the mortgage - and leave some over.

That doesn't change the fact that it is no longer a sensible idea to take out an endowment policy when borrowing to buy a house. For one thing, they are inflexible - as hundreds of thousands of people forced to cash them in have found out. The furore over low payouts for those who don't run the full course isn't necessarily good news for those who do. Better terms for those who cash in will be paid for by those who save the full term of the policy.

Much more important, new tax breaks make endowment policies a less and less attractive savings vehicle. With PEPs providing a tax-free haven for long-term investment, the uneasy mix of life assurance and investment which the endowment policy provides is long past its sell-by date. For more cautious borrowers, previously attracted by the "smoothing" effect of endowments, another option is accelerated repayment of debt, using the tried and tested repayment mortgage.

One reason bonuses have fallen so far in the past five years is that they were pushed up to unrealistic levels in the late 1980s. These fancy payouts bore witness to a marketing war that took the endowment policy to a wholly inappropriate 80 per cent of the total market. Yet even now, 65 per cent of loans are still backed by endowments. Clearly, the lesson has still to sink in.

Trade figures no cause for complacency

Trade figures are the least satisfying of all economic statistics to interpret. They are volatile, subject to big month-to-month distortions, and frequently revised. The balance of payments crisis that famously turned Denis Healey back at the airport in 1976 to face the fire from an IMF hit squad was subsequently largely revised away.

Awareness of these difficulties helps keep in perspective the deterioration in Britain's trade position in 1995. Thanks to already published partial figures for trade with countries outside the European Union, we know that the widening in the gap in October was more or less reversed in November.

Even so, there are no grounds for complacency. One worry is that import prices have increased sharply in recent months, even though the pound has been reasonably stable.

In the three months to October, import prices were 12 per cent higher than a year earlier. This may be nothing more than a delayed reaction to sterling's decline earlier in the year. Even so, it will feed through to manufacturers' costs and could be passed on in price rises at the factory gate.

If nothing else it will keep the Bank of England fully occupied in its unceasing search-and-destroy mission against all sources of inflationary pressures.

The other warning signal is the shift in the composition of growth during the past year or so, away from net exports and towards consumer spending. The export-led recovery proved to be as short-lived as it was over-hyped.

Its brevity demonstrates that the advances in exports during the early part of the recovery - and the setbacks last year - were mainly due to the economic performance of Britain's key export markets.

For all the claims of government ministers, the stark message from the trade figures is that there appears to have been little underlying improvement in the competitive appeal of British goods. That leaves prospects for the trade gap this year heavily reliant on German and American economic performance, despite a highly competitive exchange rate.