Tesco boss Sir Terry Leahy has encouraged the retail sector to concentrate on value as customer confidence starts “slowly seeping back”.

Leahy told delegates at the British Retail Consortium annual conference that retailers should invest money in the short term to build loyalty and ensure long-term stability as the economy begins to recover.

“Loyalty has a price. It may demand short-term pain, such as investing in lower prices, but it delivers medium and long-term gain. All of us here today are grappling with the toughest trading conditions in our lives. Confidence is slowly seeping back, helped by lower interest rates, energy and fuel deflation, and, of course, falling food prices. But clouds remain, the darkest being unemployment,” he said.

Leahy also issued a message calling for support from those in power. He said: “Tesco is creating 11,000 jobs this year - evidence that retail can help power us out of recession. But this can only happen more widely if government doesn’t add more to the burden of regulation and taxes.

“Politicians and policy-makers need to understand that talk of helping recovery has to be matched with deeds. As we change, so should regulators and politicians change their approach and attitude to us. And in this case that means doing less, not more, regulating and taxing,” he said.

Tesco has introduced more budget products and increased the value of its loyalty-card program to keep shoppers who are looking to trim spending in recent months.

“I am not going to try to predict the length of recession,” Leahy concluded.

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