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Looking after your local economy

Peter McGahan, chief executive of Worldwide Financial Planning, discusses how local businesses are vital for the economy

Peter McGahan, chief executive of Worldwide Financial Planning

I had the great fortune of being in two shops last week - something I do once in a blue moon.

Two learning points: Those who work in superstores and listen to that music must be made of steel. Local service is everything and it’s vital for society and the economy as a whole.

The short-term gain of a few pounds saved here and there cannot be offset against the integrity of a local family running a business and giving you outstanding service. We can use our money to serve society, or not. We cannot have Swedish standard services for American prices. The damage, not only to the economy as a whole, but your local economy and lifestyle, is unfathomable and potentially irreversible.

I’ll use a metaphorical story to explain. We can throw our money (water) into a river. For this story, we can call it The Amazon! The more we throw in, the more it gushes. The more it gushes, it rips the sides of the banks of rivers on the way down, leaving ghost towns behind it. At the end, it falls off a waterfall into a non-tax paying lake, never to return – you can’t push a river back up a hill. The lake is indeed surrounded by other non-tax paying businesses sipping away enjoying their soaring fortunes.

Alternatively, you can create a beautiful circular lake (or “circular economy”’ if you like). Surround that by nice bars, restaurants and accommodation which flourish and use that to fund the amenities and facilities society needs, to not only survive, but, to create even more sustainability. Block the river to create a dam and create electricity and in turn use that to create more versions of this lake.I’m sure you get the drift.

Amazon is expected to take more than 50% of US digital sales this year.Margins on the high street are squeezed with consumers checking out goods at local retailers and buying online. In 2019, after not paying a cent in US Federal tax, Amazon was required to pay tax. That tax was just 1.2% of Amazon’s pre-tax profit of US$13.9bn. The federal tax rate was actually 21% at that point. Its total revenue in that year was US$250bn.

Its income in 2018 was US$11bn and it received a federal tax refund of US$129m. (See metaphorical story above).

Concentration of wealth outside of our locality gives unstoppable power. Whether it's lobbying governments around policies, or, the use of concentrated targeting through social media given the quite unbelievable powers being handed to such institutions to profile you. It is not healthy to either compare yourself to anyone (ever) or to feel you always “need” something, never to feel content.