Shop till you drop in Germany

New laws in Germany now mean that stores can stay open around the clock. Retailers are hoping for a boost in consumption but Adrian Fowler of F&C is not expecting a material change.

Until recently, retailers had to close their shops by 8pm in order to comply with the strict 1956 workers protection law. Back then, shops were allowed to stay open from 7am to 6.30pm during the week and shut the doors at 2pm on Saturdays.

In November last year the law was relaxed, allowing shops to trade as long as they wished in most German states, such as Saxony-Anhalt and Schleswig Holstein. Whilst Sundays are still kept shopping-free, many investors and economists ponder whether this will lead to a significant increase in consumer spending.

"A material change in consumer spending should probably not be expected" , said Adrian Fowler, fund manager of the F&C MPF European Fund. "More important for consumer spending in Germany is the continual fall in unemployment, from 12% in summer 2005 to 9.8% today. Over the medium-term, the outlook for retail spending is good given ongoing job creation, the prospect of reasonable increase in wages and the relatively high savings ratio. An additional boost to consumer spending is expected to come from an improvement in the price level of the housing market over the next ten years."

"One of the key companies in the retail sector which looks set to benefit from the recent development is Metro. The company has a good exposure to German consumers and could benefit from structural changes in ownership. Coupled with its exposure to the higher growth Eastern European markets, it looks to be well-positioned to take place among the winners" , concluded Fowler.