'We've developed a successful international business. We are the only major British retailer to do that and one of a few in the world … I believe we have got it right in the US." So said Sir Terry Leahy in an interview with Director magazine as he prepared to stand down as chief executive of Tesco in 2011.
Fast forward two and a half years and that summation of his strategy and achievements – which had seen Tesco expand its operations to 13 countries outside the UK over Leahy's 14-year tenure at the top – looks more than a little previous.
Last December Leahy's successor, Philip Clarke, announced that the grocer was going to stop throwing good money after bad and was to pull out of its loss-making US business, at a total cost of £1.8bn. It has been searching around for a buyer ever since, but none has emerged. A shutdown now looms.
On Friday, Clarke made another major retrenchment, announcing talks to put the grocer's "strategically important" 131 Chinese stores – but loss-making and with recent like-for-like sales down nearly 5% – into a joint venture with Vanguard, part of state-owned China Resources Enterprise (CRE). It is said to be handing over "hundreds of millions" to make the move.
The China retreat must have been particularly difficult for Clarke. He was heading the grocer's international business from the moment Tesco planted its first flag in China in 2004 until he slipped into the top job. China is the world's biggest market for food and groceries, worth $1 trillion and with growth of 50% forecast for the next three years. Only three years ago Tesco was unveiling plans to build 80 vast out-of-town malls there, each to be anchored by a giant hypermarket, which would have provided more retail space than its entire UK estate.
On its website, explaining the importance of China, Tesco says: "Our global brand strength is a key asset for us in China where customers are keen for reassurance on food quality." Well, no longer. The Tesco brand name is expected to disappear, while rivals Walmart and Carrefour remain.
Tesco may attempt to paint the CRE deal as good news for both parties, but, as one analyst said: "In reality, Tesco is saying 'I can't figure out China'."
And Tesco's international problems don't end there. Clarke pulled out of Japan almost as soon as he took over, but only managed to finally extract itself from the country earlier this year and after paying a local group £40m to take the business off his hands. The most recent update showed that sales were growing in just two territories: Malaysia and Hungary. Turkey was down 15%, the Czech Republic down 9%, Poland down more than 8%, Ireland and Thailand both down 3%. The reasons? Everything from bird flu to local tax increases and restrictions on opening hours.
Highly regarded Investec analyst Dave McCarthy recently asked what until recently was unthinkable: "The question needs raising – how long will Tesco persist with its value-destroying international diversification?" The grocer, he pointed out, was still not covering its weighted average cost of capital – the rate a company pays to finance its assets – after 15 years in many countries. He urged Tesco to "bite the bullet" and withdraw from a number of territories, including Poland, Turkey "and possibly even China". UK shoppers and shareholders, he said, had subsidised enough failures.
McCarthy may have a point: Clarke has a huge job on his hands returning the UK business to rude health. He has too many big stores, not enough muscle in the booming online market and is losing shoppers to discounters, Sainsbury's and Waitrose. The UK still generates 65% of profits and is therefore key.
There again, the UK market is a mature one, with little real growth up for grabs, so Tesco needs international growth. And that is Clarke's conundrum.
Housing associations are vital to city life
To avoid a house price bubble, the UK needs to build more homes – and the right kind of homes.
While there are ways to kick the ultra-conservative Barratts, Bovises and Taylor Wimpeys up the backside, they are never going to answer simple calls to end the housing shortage. They want to drip-feed standard family homes and tiny flats into the market in such a way that the supply maintains the equilibrium of consistently rising prices. They will always be reluctant to act in anything other than their shareholders' short-term interests.
We need decent flats in urban areas families can live in and swap for bigger ones when they have more children or the little ones turn into teenagers. But the emphasis in home building is skewed towards the trad family house, semi-detached or terraced. At the most recent official count last year, around four-fifths of England's 23m dwellings were houses or bungalows and only one in five a flat or maisonette.
In London high-rises are being built with Middle Eastern money for foreigners to rent to other foreigners. We need social landlords to be given the resources to build, not high-rises, but five- and six-storey eco-blocks, pleasingly designed and landscaped, with the flexibility for young couples, families and pensioners to live near each other and swap when their circumstances change.
If the lifts work, the flats are spacious and there are trees and places to play, such rented accommodation would benefit every city. But builders hate the idea. It takes more thought and planning than they are used to.
With crime falling and public transport improving, especially with the new tram networks, people want to live in urban areas like never before.
So now is the time to boost housing associations, which accounted for only 1% of housing starts in the three months to the end of March. George Osborne halved government spending on them in his first spending review in 2010. That money should be replaced and city regeneration put centre stage.
Whoever thought this up doesn't deserve a bonus
The chairman of HSBC admitted last week what the City has been whispering for ages: bankers are likely to be given big pay rises as a result of the EU's cap on bonuses. From next year, Brussels is limiting bonuses for anyone paid more than €500,000 (£430,000) a year to one times their salary – or twice with the explicit approval of shareholders. Douglas Flint conceded that HSBC was considering giving bankers pay rises to compensate them for their potentially lower total income.
So a larger proportion of a banker's pay looks likely to be in fixed salary, meaning that banks will have smaller sums to claw back from bankers when things go wrong. It will mean bankers have less of their income at risk and so less incentive to think about the risks they are taking.
The sentiment behind the bonus cap – clamping down on bankers' pay – is a undoubtedly a good one. But the method was ill thought through and the consequences could be disastrous.