Britain's recession, now stretching into its fifth year, has not had many silver linings. Jobs are scarce, the stockmarket is flat, outside of London house prices are declining in most areas, public services are being cut, and taxes are rising. But if you like a bargain, there is a lot more choice around than there used to be.
Aldi is expanding fast. Renault has just launched one of the cheapest cars on the British market. Pound shops are filling up the empty space on the high street.
So the one part of the British economy that is going to expand in the next decade is the bottom end of the market. But the City has yet to take this on board. Entrepreneurs selling radically cheaper products are one of the only growth areas and many big, established, upmarket names are going to suffer a lot.
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There is little escaping the way in which the market is changing. For most of the last decade, encouraged by analysts and fund managers, most major companies have been pushing upmarket. Consumer spending was buoyant and the margins on selling expensive stuff were a lot more generous than they were on selling cheaper alternatives.
It made sense to race as far and fast upmarket as possible. That is still a successful strategy in a few markets. Apple has made itself the most successful company in the world selling gadgets that are mystifyingly expensive. But, increasingly, it is the exception rather than the rule. Now it is the bottom end of the market that is thriving.
Take a look at the companies that are doing well. While most of the British retail industry is in a dire state, the discount chain Aldi announced that it was planning to double the number of stores in Britain over the next decade. Last year its sales rose by 30%. Renault has just launched its ultra-cheap Dacia brand in Britain. Its SUV, built in Romania, has prices starting at less than £9,000 below many competitors' small cars.
The number of pound shops has trebled in the past five years there are more than 3,000 across Britain (they now outnumber bookshops), with 14% of them having been added over the last year. And with more and more cheap space becoming available, that trend is not likely to change soon.
There is little mystery about why this is happening. Consumers are strapped for cash, debt levels are high, and growth is nonexistent. Britain has some of the highest debts in the world more than 500% of GDP when consumer, government and corporate debt are added together. Employment has held up remarkably well, but that is only because many people have accepted part-time or lower-paid work. Incomes, once inflation is taken into account, are hardly rising at all.
With the government still cutting back on spending and with taxes probably set to rise even more if the vast budget deficit is ever to be brought under control, the chances of any rapid return to the rampant consumerism of the last decade look very slim. Cash-strapped shoppers are going to be the norm for another decade or so.
That is a big change in the market but it is one that the City, and most of big business, has been far too slow to catch up with. It is still stuck in the old groove, assuming that upmarket, high-margin strategies are the ones that will work, and that low-cost companies will simply be engaged in endless price wars that will destroy profits and make it impossible for shareholders ever to make any money.
But that world has disappeared. Entrepreneurs and new competitors are going to push into the market with low-cost strategies. The German-owned Aldi chain has done well in Britain because even chains such as Morrisons, traditionally at the budget end of the spectrum, have been racing upmarket so fast that they have left a lot of space at the bottom.
Renault can launch the Dacia in Britain because most car manufacturers are so busy adding new expensive automatic parking and other electronic gizmos to their vehicles that they have forgotten that plenty of customers are quite happy to park the car themselves and don't want to pay a company to do it for them.
Sometimes it will be foreign multinationals introducing new budget brands. Other times it will be imports from the Far East or Eastern Europe with far lower prices. Increasingly, it will be local entrepreneurs who have figured out new ways to deliver cheaper products or services. But it will be the companies offering radically lower prices that will be the ones to invest in.
Many industries in Britain, from retailing, to financial services, to media, leisure and utilities, are characterised by high prices. Companies have got used to being lazy and pushing up their prices ahead of inflation. Tesco already looks stranded with a position in the market that is too fancy for many of its core customers.
Morrisons might have gone the same way. And this goes far beyond food retailing. Sky has been pushing up pay-TV prices for years but may have reached the end of that road. The high-street banks seem intent on charging more for accounts that are not much good when they should be going in the other direction.
Only a few companies seem to have realised that across most of the developed world the easy money isn't coming back. But those are the businesses to back their high-cost competitors are the ones to ditch.
