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How UK discount is evolving: online, convenience, new players

With COVID-19 impacting the way people shop, each channel has had to adapt to satisfy changing shopper needs. The discount channel has had a mixed experience dealing with these changes throughout the pandemic. Sales have been negatively impacted due to shoppers using fewer channels and avoiding smaller stores.

For the variety discounters, such as Poundland, they have also had challenges including temporary store closures due to reduced footfall. Across the channel, there has also been the wider question over how to respond to the rising demand for online. In this article we look at how the discount channel is evolving due to the changing trading environment.

Variety discounters Poundland and B&M looking to develop their online proposition

We have seen a mixed response to the rise in demand for online services in the discount channel.

With Lidl remaining firmly committed to its store-first strategy and Aldi dipping its toe into ecommerce with the launch of its click and collect service. Now we are seeing a response from the variety discounters; Poundland has launched a trial home delivery service in Ireland.

It will initially be available to 18,000 staff and selected guests. There will be a limited range of products of around 2,000 available, including food and general merchandise. This follows the retailer closing one of its stores in the UK (Cannock), to convert it to an online fulfilment centre.

Poundland has said it will begin trialling online delivery in the UK in 2021. B&M has appointed Jens Sorensen as a new digital director. His previous position was as The Range's chief digital and omnichannel officer.

Although B&M has not commented on what his role will be, or whether they are moving into e-commerce, his appointment suggests the retailer may be focusing more online in the future. In France, the retailer launched a click and collect service in 2020 and it is likely it will be looking to this market for learnings in the future. For subscribers looking for more insight, check out our How will discounters respond to online?

Aldi and Poundland trademark convenience formats 

We are increasingly seeing the discounters adapting their propositions to suit smaller locations, for example the launch of Aldi Local in 2019.

Further developments are potentially on the horizon as we see retailers trademarking new format names; Aldi has trademarked 'Shop & Go' with the Intellectual Property Office. This is likely to be linked to a new checkout-free solution, such as a pay-and-go app, as this requires less investment from the retailer than a new store format or self-scanning technology.

To find out more about potential technology innovation at Aldi, read our Aldi explores checkout-free solutions article. Poundland has applied to trademark 'Poundland Local' and 'Poundland Go!', pointing to its latest plans for new convenience store formats. Poundland Local is to apply to stores in small towns and close to urban neighbourhoods, while Poundland Go! is for a new convenience format near transport hubs.

The retailer first announced it would be segmenting its store estate in July last year. As part of the process of revamping its existing estate and opening new stores, it will be splitting its stores into three format categories:

  1. Destination stores offering the full range of products including food, homeware, health and beauty and clothing
  2. Core stores offering a wide range of products on high streets
  3. Convenience stores offering "grab and go" easy shopping

Poundland has also recently added its new chilled and frozen range to 46 stores, bringing its total stores carrying the range to 175. The plans is to roll it out to over 500 stores.

It also opened its 350th Pepco shop-in-shop this month. Both of these additions to the stores show the retailer is looking to satisfy different, wider missions, giving shoppers more reasons to visit. For subscribers looking for more insight on the convenience channel, check out our three part series on how you can grow in the convenience channel.

New players: Mere and JFT Central

Two new value retailers look set to open in the near future, adding more competition to an already competitive sector;

Russian retailer Mere aims to open four stores in the UK. Svetofor is a Russian discounter that has 3,200 stores worldwide. The company expanded to Europe in 2018, operating under the name Mere.

It will open its first store in the UK by the summer in a former Nisa branch in Preston, Lancashire. The other stores will open in Wales and Yorkshire. Following this, the retailer is said to be looking for future expansion across the UK.

The retailer claims to be 30% cheaper than Aldi and Lidl and operates a hard discount model with no marketing, and few staff. Stores will have around 1,200 SKUs. JFT Mega Discount Warehouse is opening a new format. It currently has 12 outlets on retail parks in the Midlands and the north of England.

The warehouse and online business currently sells a wide range of products including food & drink, health & beauty, garden, and DIY products. Customers have to sign up to a free membership scheme to shop in its warehouses. Its new format will be called JFT Central, and it will be another value-based variety store.

The retailer has said it is looking to open at least 50 stores, according to The Times. It will be run by Jeremy Coombes, a corporate financier with experience in lending to small and medium-sized enterprises. He said that the market was full of opportunity because of low-rent deals currently on offer as landlords were desperate to fill empty units.

The first opening is set to be in Hull in a former Mothercare store. We do not currently know the opening date.

Final thoughts

Going forwards the discount retailers will need to find more ways to remain relevant in the changing environment. With retailers such as Tesco and Sainsbury's offering price matches to Aldi, the low price differentiator is not as strong as before.

Expect more development in the channel as the retailers look to satisfy the rising demand for online, and different shopping missions. 

Looking for more insight?

Discount newsletter

Categories
Coupons & Offers

How UK discount is evolving: online, convenience, new players

With COVID-19 impacting the way people shop, each channel has had to adapt to satisfy changing shopper needs. The discount channel has had a mixed experience dealing with these changes throughout the pandemic. Sales have been negatively impacted due to shoppers using fewer channels and avoiding smaller stores.

For the variety discounters, such as Poundland, they have also had challenges including temporary store closures due to reduced footfall. Across the channel, there has also been the wider question over how to respond to the rising demand for online. In this article we look at how the discount channel is evolving due to the changing trading environment.

Variety discounters Poundland and B&M looking to develop their online proposition

We have seen a mixed response to the rise in demand for online services in the discount channel.

With Lidl remaining firmly committed to its store-first strategy and Aldi dipping its toe into ecommerce with the launch of its click and collect service. Now we are seeing a response from the variety discounters; Poundland has launched a trial home delivery service in Ireland.

It will initially be available to 18,000 staff and selected guests. There will be a limited range of products of around 2,000 available, including food and general merchandise. This follows the retailer closing one of its stores in the UK (Cannock), to convert it to an online fulfilment centre.

Poundland has said it will begin trialling online delivery in the UK in 2021. B&M has appointed Jens Sorensen as a new digital director. His previous position was as The Range's chief digital and omnichannel officer.

Although B&M has not commented on what his role will be, or whether they are moving into e-commerce, his appointment suggests the retailer may be focusing more online in the future. In France, the retailer launched a click and collect service in 2020 and it is likely it will be looking to this market for learnings in the future. For subscribers looking for more insight, check out our How will discounters respond to online?

Aldi and Poundland trademark convenience formats 

We are increasingly seeing the discounters adapting their propositions to suit smaller locations, for example the launch of Aldi Local in 2019.

Further developments are potentially on the horizon as we see retailers trademarking new format names; Aldi has trademarked 'Shop & Go' with the Intellectual Property Office. This is likely to be linked to a new checkout-free solution, such as a pay-and-go app, as this requires less investment from the retailer than a new store format or self-scanning technology.

To find out more about potential technology innovation at Aldi, read our Aldi explores checkout-free solutions article. Poundland has applied to trademark 'Poundland Local' and 'Poundland Go!', pointing to its latest plans for new convenience store formats. Poundland Local is to apply to stores in small towns and close to urban neighbourhoods, while Poundland Go! is for a new convenience format near transport hubs.

The retailer first announced it would be segmenting its store estate in July last year. As part of the process of revamping its existing estate and opening new stores, it will be splitting its stores into three format categories:

  1. Destination stores offering the full range of products including food, homeware, health and beauty and clothing
  2. Core stores offering a wide range of products on high streets
  3. Convenience stores offering "grab and go" easy shopping

Poundland has also recently added its new chilled and frozen range to 46 stores, bringing its total stores carrying the range to 175. The plans is to roll it out to over 500 stores.

It also opened its 350th Pepco shop-in-shop this month. Both of these additions to the stores show the retailer is looking to satisfy different, wider missions, giving shoppers more reasons to visit. For subscribers looking for more insight on the convenience channel, check out our three part series on how you can grow in the convenience channel.

New players: Mere and JFT Central

Two new value retailers look set to open in the near future, adding more competition to an already competitive sector;

Russian retailer Mere aims to open four stores in the UK. Svetofor is a Russian discounter that has 3,200 stores worldwide. The company expanded to Europe in 2018, operating under the name Mere.

It will open its first store in the UK by the summer in a former Nisa branch in Preston, Lancashire. The other stores will open in Wales and Yorkshire. Following this, the retailer is said to be looking for future expansion across the UK.

The retailer claims to be 30% cheaper than Aldi and Lidl and operates a hard discount model with no marketing, and few staff. Stores will have around 1,200 SKUs. JFT Mega Discount Warehouse is opening a new format. It currently has 12 outlets on retail parks in the Midlands and the north of England.

The warehouse and online business currently sells a wide range of products including food & drink, health & beauty, garden, and DIY products. Customers have to sign up to a free membership scheme to shop in its warehouses. Its new format will be called JFT Central, and it will be another value-based variety store.

The retailer has said it is looking to open at least 50 stores, according to The Times. It will be run by Jeremy Coombes, a corporate financier with experience in lending to small and medium-sized enterprises. He said that the market was full of opportunity because of low-rent deals currently on offer as landlords were desperate to fill empty units.

The first opening is set to be in Hull in a former Mothercare store. We do not currently know the opening date.

Final thoughts

Going forwards the discount retailers will need to find more ways to remain relevant in the changing environment. With retailers such as Tesco and Sainsbury's offering price matches to Aldi, the low price differentiator is not as strong as before.

Expect more development in the channel as the retailers look to satisfy the rising demand for online, and different shopping missions. 

Looking for more insight?

Discount newsletter

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Coupons & Offers

UK targets Gupta’s GFG Alliance in fraud probe linked to Greensill

By Huw Jones and Eric Onstad LONDON (Reuters) -Tycoon Sanjeev Gupta's commodities empire is being investigated by Britain's Serious Fraud Office in a probe that encompasses the conglomerate's links to collapsed lender Greensill Capital, the SFO said on Friday. The probe piles pressure on Gupta, who has been scrambling to refinance his international web of businesses in steel, aluminium and energy after supply chain finance firm Greensill filed for insolvency in March.

In a statement, the anti-graft agency said it was "investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd." GFG said it would co-operate fully and would not comment further on the investigation. The SFO said it had no further comment.

Greensill Capital lent money to firms by buying their invoices at a discount, but it collapsed in March after one of its main insurers declined to renew its cover. Its sudden failure has resonated around the world, drawing in Swiss investment bank Credit Suisse, German depositors and former British Prime Minister British Cameron, who was grilled in parliament this week over his lobbying efforts on behalf of Greensill. Authorities are starting to home in on both Gupta and Greensill with Britain's Financial Conduct Authority on Tuesday saying it was formally investigating Greensill's UK operations as part of global probes.

Germany's financial regulator shuttered Greensill's Bremen-based bank and filed a criminal complaint against it earlier this year saying the lender could not provide evidence of receivables on its balance sheet. GFG was Greensill's largest client. It said in February it would "collapse into insolvency" if the supply chain finance firm stopped providing it with working capital, Greensill said in its insolvency filing in March.

Story continues Greensill cited a £5 billion exposure to GFG Alliance when it filed for bankruptcy protection in Australia and Britain in March, a source familiar with the matter said on condition of anonymity. SAVIOUR OF STEEL

Gupta had been lauded as the saviour of steel in Britain as he bought distressed assets in economically-deprived areas. His group has 35,000 workers, including 5,000 in Britain, and annual revenues of £20 billion. GFG also has operations in Europe, Australia and the United States.

Liberty Steel, part of the GFG group, said last week it had appointed a committee to restructure and refinance it. On Friday, GFG said it was making progress in the financing efforts and on Thursday, Gupta's Wyelands Bank said it was looking at a sale or winding up operations. Among the investors burnt in the widespread fallout from Greensill's collapse were clients of Credit Suisse, who had invested in a £7.3 billion finance fund exposed to debt issued by the finance firm.

The Swiss bank declined on Friday to comment on the UK fraud investigation, but repeated a comment from last week saying it wanted a credible restructuring plan. "We have asked GFG Alliance for that repeatedly and nothing has been forthcoming."

(Additional reporting by Eric Onstad and Tom Bergin; editing by David Goodman, Jason Neely and Barbara Lewis)

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£10 off as Deliveroo launches in town

Restaurants serving Turkish, Italian and Caribbean food will all be available to order from online - as Deliveroo launches in a Kent town. The delivery service, which already operates in Ashford and Canterbury, is also offering a discount to the new customers in Herne Bay and village Greenhill.

Deliveroo has this week launched in Herne Bay. Picture: Deliveroo Deliveroo has this week launched in Herne Bay. Picture: Deliveroo

Residents will be able to place orders for meals, either online or through an app, from the likes of Papa John's, High Street eatery Grapevine Meze Bar and Pops Jerk. Meanwhile, grocery stores Co-op and Morrisons will also be available on the platform.

Deliveroo's head of UK expansion, Berenice Cowan, said: "At last, we've arrived in Herne Bay.

"We can't wait to bring everyone great food from local and national favourites, and to help local chefs reach new customers." Deliveroo is offering all new customers GBP10 off their first order, costing at least GBP15, using the code HERNEBAY.

.

The British firm is also running a 20% promotion at selected restaurants. It expects to add more town restaurants, takeaways and convenience stores to the platform over the next few months.

A Deliveroo spokesman added: "The launch will be a major boost to small restaurant businesses across Herne Bay who will be able to reach new customers and grow their restaurants through offering delivery.

"Working with Deliveroo increases restaurants' sales as they can reach a wider range of customers. "This enables restaurants to expand their businesses, often employing more staff, broadening their menus and lengthening opening times as a result."

Deliveroo is still looking to employ as many as 50 riders in Herne Bay Deliveroo is still looking to employ as many as 50 riders in Herne Bay

Deliveroo is among the delivery service firms to have seen a huge soar in demand in the last year, as the pandemic saw eateries closed for months on end and people relying increasingly upon food delivery. The company is still looking for as many as 50 people to become food delivery riders in Herne Bay.

Here's the full list of businesses in the town joining the platform:

  • Co-operative
  • Morrisons
  • Papa John's
  • Grapevine Meze Bar
  • Saloon Bar Grill
  • The Mascot Bakery
  • Gandhi Tandoori Restaurant
  • Graingers Sandwich Bar
  • Greenhill's King Cod
  • Greensteds
  • Herne Bay Tandoori Takeaway
  • Pops Jerk
  • Sunset Fish Bar

Head to our business page for all of the latest news about businesses in Kent

Read more: All the latest news from Herne Bay

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‘Russian Lidl’ wants to open new supermarkets ‘ASAP’

A new Russian discount supermarket, which has been dubbed cheaper than Aldi or Lidl, is opening stores around the UK - and Plymouth is on its list of locations. Svetofor, operating under the name Mere, is a Russian discount supermarket that has 3,200 stores worldwide and a spokesperson for the company confirmed a list of places it would like to open in the UK when talking to The Grocer. It included three locations in the South West: Exeter, Plymouth and then more generally Devon.

The company expanded to Europe in 2018 and this year will be the first time for it to open a supermarket in this country. So what else do we know about the discount chain coming to our city? Here's what we know so far.

Mere is a budget supermarket claiming to be 30 percent cheaper than the UK's most affordable supermarkets, such as Aldi and Lidl. The brand announced its UK openings earlier this month, with the first store set to launch at a former Nisa branch in Preston, Lancashire. Mere also confirmed plans for four other stores, located in Wales and Yorkshire.

The shops will be in Mold in North Wales, Caldicot in southern Wales, and Castleford in West Yorkshire. At the moment, the brand is giving little else away on their social media, with signs saying 'coming soon'. Their Instagram bio reads: "Our profile is the retail chain in the food sector that offers its customers good goods for little money."

Russian supermarket coming to Exeter and PlymouthRussian supermarket coming to Exeter and Plymouth

Speaking to The Grocer, the supermarket announced more potential future store openings across the UK.

Mere UK stores - full list Cardiff Banbury

Barnsley Beckenham Bradford

Devon Exeter Gloucester

Grantham Kettering Middlesborough

Neath Northampton Oswestry

Plymouth Selby Sheffield

Southampton Stretford Southern Scotland

Wales However this list is only locations that the company is considering, as they will need the help of third parties. Mere is appealing for landlords to contact it via its website, and require sites of around 10,000 sq ft.

On its website, Mere said: "We are looking for suitable locations across UK to expand our retail chain. "At the moment, despite coronavirus, we are actively involved with landlords, their representatives and agents with the aim to open our Mere retail stores ASAP." The budge supermarket's requirements are sites of around 10,000 sq ft, with parking spaces for up to 40 cars, and a local population of 60,000 or more.

While you're here, can you fill in our quick survey? The story continues below. Pavels Antonovs, Head of Buying at Mere UK, commented on the possible future openings.

"I have just now met with a manufacturer with a turnover of GBP150million and we signed for eight SKUs. "On March 13, we opened a store in Latvia and the queue outside was 570 people. "In Germany, when we opened our first store, it had been bought out [of stock] in two days."

Svetofor has about 3,200 stores internationally and has been opening in Europe under the name Mere since 2018, with stores in Germany, Poland, Romania, Lithuania, Latvia, and Ukraine.

As well as the UK, it plans to soon expand in Italy, Spain, Greece, and Bulgaria.

Its UK stores will have around 1,200 products in every branch, but will only have eight members of staff.

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‘Russian Lidl’ wants to open new supermarkets ‘ASAP’

A new Russian discount supermarket, which has been dubbed cheaper than Aldi or Lidl, is opening stores around the UK - and Plymouth is on its list of locations. Svetofor, operating under the name Mere, is a Russian discount supermarket that has 3,200 stores worldwide and a spokesperson for the company confirmed a list of places it would like to open in the UK when talking to The Grocer. It included three locations in the South West: Exeter, Plymouth and then more generally Devon.

The company expanded to Europe in 2018 and this year will be the first time for it to open a supermarket in this country. So what else do we know about the discount chain coming to our city? Here's what we know so far.

Mere is a budget supermarket claiming to be 30 percent cheaper than the UK's most affordable supermarkets, such as Aldi and Lidl. The brand announced its UK openings earlier this month, with the first store set to launch at a former Nisa branch in Preston, Lancashire. Mere also confirmed plans for four other stores, located in Wales and Yorkshire.

The shops will be in Mold in North Wales, Caldicot in southern Wales, and Castleford in West Yorkshire. At the moment, the brand is giving little else away on their social media, with signs saying 'coming soon'. Their Instagram bio reads: "Our profile is the retail chain in the food sector that offers its customers good goods for little money."

Russian supermarket coming to Exeter and PlymouthRussian supermarket coming to Exeter and Plymouth

Speaking to The Grocer, the supermarket announced more potential future store openings across the UK.

Mere UK stores - full list Cardiff Banbury

Barnsley Beckenham Bradford

Devon Exeter Gloucester

Grantham Kettering Middlesborough

Neath Northampton Oswestry

Plymouth Selby Sheffield

Southampton Stretford Southern Scotland

Wales However this list is only locations that the company is considering, as they will need the help of third parties. Mere is appealing for landlords to contact it via its website, and require sites of around 10,000 sq ft.

On its website, Mere said: "We are looking for suitable locations across UK to expand our retail chain. "At the moment, despite coronavirus, we are actively involved with landlords, their representatives and agents with the aim to open our Mere retail stores ASAP." The budge supermarket's requirements are sites of around 10,000 sq ft, with parking spaces for up to 40 cars, and a local population of 60,000 or more.

While you're here, can you fill in our quick survey? The story continues below. Pavels Antonovs, Head of Buying at Mere UK, commented on the possible future openings.

"I have just now met with a manufacturer with a turnover of GBP150million and we signed for eight SKUs. "On March 13, we opened a store in Latvia and the queue outside was 570 people. "In Germany, when we opened our first store, it had been bought out [of stock] in two days."

Svetofor has about 3,200 stores internationally and has been opening in Europe under the name Mere since 2018, with stores in Germany, Poland, Romania, Lithuania, Latvia, and Ukraine.

As well as the UK, it plans to soon expand in Italy, Spain, Greece, and Bulgaria.

Its UK stores will have around 1,200 products in every branch, but will only have eight members of staff.

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Discount retailer The Works sees sales tumble as an online boom is not enough to make up for lost business at closed stores

(C) Provided by This Is Money MailOnline logo

Discount retailer The Works saw revenues tumble by a fifth over the past year as rising online sales did not make up for lost business due to store closures.

The chain, which sells craft supplies, gifts, books, toys and games and stationery, saw a 121 per cent boom in online sales in the year to May. 

But total sales still fell 19 per cent to GBP206.2million in the period, with the drop driven purely by the physical shops, which were closed for more than a third of the time.

(C) Provided by This Is Money (

The Works has 527 stores in the UK and Ireland.

The majority have now reopened, except in the Republic of Ireland, where they are set to welcome shoppers again on Monday next week.

But stores have been closed for long periods.

For the 16 of the 53 weeks to the start of May all of The Works' shops were closed due to lockdowns, and more than 75 per cent of its estate was forced to shut for an additional eight weeks.

Chief executive Gavin Peck said: 'Like many retailers, the last 12 months have been incredibly challenging for The Works, which has historically relied mainly on in-store sales. 

'Our business was severely impacted by successive lockdowns and forced closures of our entire store estate.'

Since the stores reopened, they have performed well, although the company remained cautious.

'It is probably too soon to judge the extent to which these encouraging sales reflect strong underlying performance as opposed to pent up demand,' it said.

Meanwhile, online sales have reduced since stores reopened, although they are still 'significantly ahead' of their pre-Covid levels. 

The Works said it wouldn't yet give a profit guidance due to persisting uncertainty but was 'confident' in the future prospects of the business due to its 'strong financial position' and 'appeal of its proposition'. 

'Since we couldn't control store closures we focused on the things we could, keeping tight control of costs, optimising our operations and vastly improving our online offering,' Peck said.

'As a result, our financial position remained strong, online growth exceeded our expectations, and when stores reopened we saw customer demand returning quickly to pre-Covid levels.'

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Discount retailer The Works sees sales tumble as an online boom is not enough to make up for lost business at closed stores

(C) Provided by This Is Money MailOnline logo

Discount retailer The Works saw revenues tumble by a fifth over the past year as rising online sales did not make up for lost business due to store closures.

The chain, which sells craft supplies, gifts, books, toys and games and stationery, saw a 121 per cent boom in online sales in the year to May. 

But total sales still fell 19 per cent to GBP206.2million in the period, with the drop driven purely by the physical shops, which were closed for more than a third of the time.

(C) Provided by This Is Money (

The Works has 527 stores in the UK and Ireland.

The majority have now reopened, except in the Republic of Ireland, where they are set to welcome shoppers again on Monday next week.

But stores have been closed for long periods.

For the 16 of the 53 weeks to the start of May all of The Works' shops were closed due to lockdowns, and more than 75 per cent of its estate was forced to shut for an additional eight weeks.

Chief executive Gavin Peck said: 'Like many retailers, the last 12 months have been incredibly challenging for The Works, which has historically relied mainly on in-store sales. 

'Our business was severely impacted by successive lockdowns and forced closures of our entire store estate.'

Since the stores reopened, they have performed well, although the company remained cautious.

'It is probably too soon to judge the extent to which these encouraging sales reflect strong underlying performance as opposed to pent up demand,' it said.

Meanwhile, online sales have reduced since stores reopened, although they are still 'significantly ahead' of their pre-Covid levels. 

The Works said it wouldn't yet give a profit guidance due to persisting uncertainty but was 'confident' in the future prospects of the business due to its 'strong financial position' and 'appeal of its proposition'. 

'Since we couldn't control store closures we focused on the things we could, keeping tight control of costs, optimising our operations and vastly improving our online offering,' Peck said.

'As a result, our financial position remained strong, online growth exceeded our expectations, and when stores reopened we saw customer demand returning quickly to pre-Covid levels.'

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Why UK stocks won’t be cheap for much longer | MoneyWeek

The British economy is poised to enjoy its fastest growth in over 70 years, according to the latest Bank of England forecasts. A successful vaccination programme and continued government fiscal support should help GDP expand by 7.25% in 2021, the fastest pace since at least 1949. The Bank also thinks unemployment will peak at 5.5% this year, a big cut from its previous forecast of 7.75%. 

Strong growth means no negative rates

British stocks surged on the update, with the FTSE 100 topping 7,100 to hit a post-pandemic high last Friday before falling back amid this week's global sell-off (see below).

The index has gained 6% since the start of the year, while the mid-cap FTSE 250 index is up by 8%.  "Let's not get carried away," says Bank governor Andrew Bailey. Strong growth is to be expected as the economy recovers from a 9.9% contraction last year, its biggest decline since 1709.

The Bank now expects UK GDP to return to pre-pandemic levels by the end of this year, but that still means that "two years of output growth have been lost". This is a rebound, not a boom.  The Bank held interest rates at 0.1% last week.

It doesn't expect to raise them until the end of next year. At the start of the year the debate was about whether we were heading for interest rates below zero, notes Laith Khalaf of AJ Bell. The Bank is still doing technical work on the idea, but it has turned into "a purely academic exercise".

Instead, the talk now is about when rates will rise; markets currently price in a 25% chance of a hike over the next 12 months. "Negative rates are... dead before arrival." 

Dividends recover

UK income investors have endured a 41.6% fall in dividends over the year since the pandemic began, a loss of GBP44.8bn, according to data from Link Group. Dividends continued to fall in the first quarter, but Link notes that the pace of reductions is slowing. "Half of UK companies either increased, restarted or held their dividends steady" during the first three months of the year. The return of payouts from big banks means Link now expects underlying dividends to grow 5.6% this year to GBP66.4bn.

Special payouts from Tesco and commodity miners mean the "headline" numbers will be even better.  The UK market has been one of the cheapest in the developed world in recent years and currently trades on a cyclically adjusted price/earnings (p/e) ratio of about 14.5. The UK discount is finally starting to "unwind", says Lex in the Financial Times.

Simon French of Panmure Gordon calculates that the "valuation gap with the rest of the world" (as measured by price/earnings and other metrics) has fallen from 20% in 2020 to 15% now. 

The ratification of the post-Brexit trade deal with Europe removes one "red flag" that has stopped global money managers from buying British.

The ongoing rotation away from tech stocks and towards cyclical energy and financial businesses also plays to London's strengths. "UK stocks will not stay cheap for much longer."

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City Snapshot: Pepco offers share at a discount in upcoming €5bn IPO

Poundland Worthing Top story Poundland owner Pepco is has set its price in the upcoming Polish IPO at a discount, valuing the budget retail chain at £5bn (GBP4.3bn).

Steinhoff, the South African parent company of Pepco, set the price of shares in the flotation at 40 zlotys a piece (EUR8.82). It puts the offer at the lower end of the range of 38 zlotys (EUR8.32) and 46 zlotys (EUR10.08), guided by the group earlier this month. Pepco will look to raise about EUR700m from the sale of more than 80 million existing shares in the IPO, but has room to sell up to 92.5 million if demand allows.

The discounter also sold a further 23 million shares to its lenders to raise additional funds of EUR200m. The free float will total 20.1% on admission to public markets, which is expected to be on 26 May. Pepco revealed last month it had opted to list on the Warsaw Stock Exchange rather than in London given its exposure to the Polish market.

The group, which operates as Pepco, Poundland and Dealz, has more then 3,200 stores located across 16 countries. Pepco CEO Andy Bond said: "We are proud to be joining the Warsaw Stock Exchange in what will be its biggest IPO to date in 2021 and to become one of the largest listed companies in Warsaw. Our group operates in the attractive European discount retail sector, and with our three market-leading brands - Pepco, Dealz and Poundland - we are extremely well positioned to take advantage of the enormous growth opportunities in front of us.

"We are pleased to have received strong interest and support from a broad range of high-quality international and Polish investors, including substantial retail demand, who have all recognised the quality of our financial track record and the substantial, long-term store growth opportunity that we can readily finance through our internally generated cash-flow." Morning update Elsewhere on The Grocer this morning, there are two stories about upcoming M&A in the industry.

Fresh from completing a EUR1.7bn buyout of Valeo, Bain Capital is leading the chase for Wagon Wheels and Jammie Dodgers maker Burton's Biscuits. The Boston-based private equity firm is among the final group of interested parties in the auction led by Stamford Partners, along with Biscuit International and Fox's owner Ferrero. Read the full story on thegrocer.co.uk here.

The auction for Gu Puds is also drawing to a conclusion, with PE firm Exponent close to completing a GBP150m deal. Former Quorn owner Exponent has a long history in the consumer space and currently holds dairy supplier Meadow Foods, East Asian food platform Vibrant Foods and snacks brands Proper and Eat Real. The PE firm has been a strong contender since the Gu auction, handled by corporate finance firm Spayne Lindsay, kicked off late last year.

Read the story here. The FTSE 100 has mounted a recovery once again to climb back above 7,000pts this morning. It is currently up 0.8% to 7,019.22pts.

Shares on the up this morning include, Greencore, rising 2.8% to 167.5p, Kerry Group, up 2.4% to EUR109.30, SSP Group, climbing 2.1% to 315.2p, and Pepco owner Steinhoff, which was up 2.1%. Earlier fallers include Delivery Hero, Bakkavor Group, Hellfresh and Danone. Yesterday in the City

The FTSE 100 suffered a 0.6% loss down to 6,963.33pts as inflation fears continued to stalk the market. There was little in the way of company news to influence food and drink shares yesterday, but many in the industry escaped the general negative investor sentiment. Kerry Group, CC&C Group, Deliveroo and M&S, led the fallers, down 2.3% to EUR106.70, 2.3% to 285p, 2.2% to 238.4p and 0.8% to 151.3p respectively.

The risers included McColl's Retail Group, up 3.2% to 36p, Stock Spirits Group, up 2.8% to 275.5p, AG Barr, up 1.4% to 522p, and Bakkavor, up 1.6% to 131.4p.

Ocado, Pets at Home, Premier Foods, Reckitt Benckiser, Unilever, Greggs, Hotel Chocolat, Hilton Food Group and Fevertree also escaped the gloom.