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High street shake-out

Woolworths has gone, many other famous stores will disappear, but a new age of shopping will emerge

Traditionally it is the days and weeks after Christmas that are the most terrifying for retailers. The final quarter of the year arrives when rents have to be paid (this year, it is actually on 25 December), the invoices from suppliers pile up, a visit from the VAT man is imminent and the banks start to get antsy about the swelling overdrafts and feeble cash flow. Within days, the corporate undertakers come knocking.

This year the pattern has been different. Amid the carnage of the credit crunch, no one is taking any chances. Even if you are a company such as Woolworths - which takes in 80 per cent of its income in the six weeks leading up to Christmas - impatience sets in. The first thing to go is the credit insurance, the guarantee to suppliers that they will be paid, come hell or high water. When that happens, the sweet factory demands cash for each shipment of pick'n'mix and banks start becoming nervous. Before the directors have a chance to take emergency action, such as selling off a string of stores to rivals, the plug has been pulled.

The demise of Woolworths, a fixture on Britain's high streets for a century, is not that surprising. Its elder sister in the United States died some years ago and its falling share price has been signalling disaster for some time. But Woolworths is far from being alone. Among the reasons that Alistair Darling chose to make a 2.5 per cent cut in VAT the centrepiece of his pre-Budget report is that it has two important characteristics. Unlike an income or corporation tax, it can be administered swiftly - without the need for a complex finance bill. Second, it does help the consumer and the high street.

The sceptics have argued that a few pence or pounds off prices as a result of lowering VAT makes no difference in a year when Marks & Spencer is conducting guerrilla sales tactics ("20 per cent off" days, designed to catch the opposition on the hop) and other high-street chains are permanently holding sales.

Such observations are economically illiterate: by hook or by crook the cut in VAT will put £12bn into the economy over a relatively short period. Even if the price cut is not passed on, it will mean that smaller high-street boutiques may be able to hang on a little longer (by widening profit margins) allowing them to main tain a job or two that might have been shed in recession conditions.

What is different about the present crisis on the high street, which has seen the demise of Woolworths, MFI, MK One, as well as a slump in the shares of DSG (owner of Currys, PC World and the online Dixons site), is that it reflects changes in retailing and the way we shop.

It is no coincidence that the Woolworths on my local high street in south-west London had already closed by the time the administrators moved in and the premises were being refitted as a Tesco Extra.

The boundaries between shopping chains have changed. When Tesco reached saturation point in food sales, at the point where it became subject to regular competition and monopoly investigations, it headed in the direction of diversification. No longer is it just a grocer. It is a newsagent (watch out W H Smith), a clothing retailer (be careful Debenhams), an electronics outfit (no wonder Currys is hurting) and has moved into the video entertainment business (poor old Woolies). Tesco, the dominant force in British shopping, is not alone in this. There is no longer such a thing as a specialist retailer.

The big grocers - Tesco, Asda, Sainsbury's and, to a lesser extent, Morrisons - realised some time ago that while people came to their stores for their daily bread, the profit margins on food are relatively narrow. But if they could bulk-buy products - from fashionable clothes to flat-screen televisions made in China and the Far East - they could become vast department stores. Indeed, the profit margins on the clothes and electrical goods could be better than those on the 50,000 food items.

Even the venerable Marks & Spencer, still the nation's biggest clothing retailer with around 12 per cent of the market, is in the television and kettles business. Consumers who trust M&S with their lingerie needs are not going to doubt that an M&S kettle is as good as one bought from Currys. The need for the general store, of which Woolworths was the exemplar with its eclectic mix of everything from screwdrivers to chocolate bars, is no longer there.

Also undermining the high street is, of course, the internet. Personally, as much as I love browsing in bookshops, new and secondhand, it is a long time since I made a purchase from one. My book shopping is done online through Amazon or the fantastic used-book site AbeBooks. Online sales are rising exponentially, climbing by 54 per cent to £46.6bn in 2007. This is money that is being cannibalised from the high street. Does all of this mean that the high street as we know it is over? One doubts it. But the line-up of stores will change. Tescopoly has its natural limits. In much the same way as Woolworths has been replaced by its modern equivalent, Wilkinsons (which is seeking to buy Woolworths' premises), in some suburban centres, so Currys is going to find itself under pressure from the American import Best Buy, where the emphasis is on expertise and service.

Once it was out-of-town shopping that was the threat. But soon the developers realised that people actually like the social aspect of open-air, high-street shopping and have redeveloped the high street from Bristol to Leeds with open spaces and cafes. The high street is organic and over the coming year or so, as the slump bites, empty stores will proliferate. But don't despair - there will always be an entrepreneur ready to bet on recovery and find ever new ways to claim the shopping pound.

Alex Brummer is City editor of the Daily Mail

Retail carnage

Woolworths - the chain has collapsed with debts of £385m and many of its 815 branches (and 30,000 jobs) are expected to go.

Argos - after reporting its biggest ever fall in sales in October, staff had their hours cut by 20 per cent.

John Lewis - reported a 13 per cent drop in sales, its tenth successive decline.

Debenhams - is carrying nearly £1bn in debts, and profits have dropped by 16 per cent.

MFI - the company went into administration last week; 1,000 jobs will be lost.

Character Group - shares in the firm, which supplies Britain's biggest toy retailers, including Tesco and Toys R Us, dropped 20 per cent last week. The company is now valued at little more than the value of its bank deposits.
JJB Sports - selling off assets to repay £20m loan; JD Sports is considering buying its rival.

Land of Leather - the furniture retailer reports sales down 47 per cent on last year.

Majestic Wine - its half-year profits are down 25 per cent.

Wrapit - the wedding gift-list firm went under in August, taking up to 2,000 couples' presents with it.
Rosebys - the textiles chain closed for good last month - 201 shops have shut.

Hardy Amies - the Savile Row tailor and one-time dressmaker to the Queen went into administration in October, forcing the closure of five of its six UK stores.
. . . and even Tesco has posted its worst performance since 1992, with just 1.9 per cent growth. Shares fell 40 per cent in the past year.

This article first appeared in the 08 December 2008 issue of the New Statesman, After the Terror

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Good riddance to Boris – but the Tory party still needs to find a unifying leader

With Boris gone, Theresa May and Michael Gove are serious contenders for the crown.

UPDATE:  From the moment Michael Gove decided to run for the Conservative leadership Boris Johnsons days were numbered. This is particularly true because of the typically unequivocal comment that Gove made about Johnsons leadership capabilities or lack of them in his announcement. For Johnson has led a remarkably charmed life in both politics and journalism in recent years. Reality has finally caught up with him. It was always going to be the case that if Gove stood many who had pledged their allegiance to Johnson would, because of this lack of leadership qualities, think again. The inevitable has now happened, and Johnson, for once, has accepted reality.

Michael Gove appears, at the eleventh hour, to have learned something about Boris Johnson that anyone who has worked with him either in journalism or politics could have told him years ago: that Johnson is entirely unreliable. The leaked email in which Gove’s wife, Sarah Vine, warned him of the assurances he needed to get from Johnson before pledging himself as the key supporter in his campaign turns out to have been the writing on the wall for a clear run for Johnson. Word was swirling round Westminster after the email was leaked that Johnson appeared to have offered the same senior cabinet post – believed to have been the Treasury – to more than one person in return for support. Perhaps this was down to incompetence rather than dishonesty. Gove has made his own judgement, and it is, for an intelligent and serious man, an inevitable one.

Many Brexiteers, who feel that someone who shared their view should end up leading the Tory party, will be delighted by Gove’s decision. There was deep unease among many of them about the idea of a showman rather than a statesman inevitably ending up in Downing Street. What Gove will need to do now is to persuade colleagues who had gone behind Johnson because they did not want Theresa May to shift behind him. Some of Johnson’s supporters caused enormous surprise by their decision – such as Sir Nicholas Soames, who spent the referendum campaign denouncing Johnson on his Twitter feed – and they are not natural bedfellows of his. One Tory MP told me before Gove’s decision to stand that a group of “sensible” Tories had accepted the inevitability of a Johnson victory and had decided to get around him to try to keep him on the straight and narrow. The view that Johnson is unstoppable has now been tested, and those who had made the leap to support him may now well leap back.

Following Theresa May’s very assured launch of her campaign, which radiated statesmanship and sincerity, the Brexiteers need to ask themselves what sort of candidate is going to provide the best challenge to her, for she is clearly formidable. Given the choice between a volatile buffoon taking her on or someone who is more level-headed and serious doing so, the latter must inevitably be the best option. Johnson never looked like a unifying figure, and certainly not one it was easy for rational people to imagine leading the country in an international context.

Gove’s decision not to support Johnson does not merely withdraw his personal support. It will withdraw the support of many who were prepared, reluctantly, to follow his lead and join the Johnson campaign. It has a parallel in history, which was William Hague’s decision to run on his own account instead of supporting Michael Howard in the 1997 contest after the party’s annihilation by Tony Blair. Hague won, and turned out to be a hapless leader. Gove is made of heavier metal and the party is in less perilous circumstances, so the outcome for him, should he win, ought to be better.

In the past few days a considerable portion of the Tory party has taken leave of its senses. In such a condition, envisaging Johnson as its leader was easy. Sanity and calm are now prevailing. The Brexiteers in the party – or at least that group of them resolute that they cannot have a Remainer as leader can now reflect on whether they want an act or a politician to become prime minister. At least, thanks to Mr Gove, they now have a choice.

The Johnson phenomenon

Once upon a time, often within hours of a prime minister resigning, a “magic circle” of Tory grandees would decide after “soundings” whom to send to Buckingham Palace to kiss hands as the new man. Now, the 1922 Committee of Tory backbenchers has sought to do what it can to emulate the process, fast-tracking the election of David Cameron’s successor so that he or she is in place by 9 September, and ignoring calls for a period of wider reflection on whom the party needs to take it forward through the uncharted waters of negotiating an exit with the European Union. Longer consideration may have been helpful, given that the party is choosing not merely its leader, but the next prime minister.

It soon appeared the main fight would be between Boris Johnson and Theresa May. Jeremy Hunt proposed himself as a “second referendum” candidate, even though the Tory party in particular wants another plebiscite about as much as it would like to put its collective head in a mincer. There was talk of two lesser cabinet ministers, Stephen Crabb and Sajid Javid, presenting a “joint bid”, even though such a concept is unknown to the Conservative constitution; and others were floating around the margins. The tumult reflects the hysterical state of mind in the party: no one in Cameron’s inner circle expected the British public to disobey orders, including, one starts to imagine, Johnson. It is only the preposterous events in the Labour Party that have stopped the Tories from seeming to be completely out of control.

It has become Tory party lore that the favourite never wins, on the precept that he who wields the knife never ends up wearing the crown. Many of the Tory MPs believed nothing could prevent their colleagues voting in sufficient numbers to put Johnson in the second and final round of the contest, the one in which all paid-up members may vote. And if he got there, they felt, the outcome was even less in doubt: he would win.

Predicting this will happen and wanting it to happen are, of course, not the same thing. A distressed Tory MP told me he expected Labour sympathisers to join his party to vote for Johnson, rather as mischievous Tories joined Labour to elect Jeremy Corbyn. The rules, however, forbid such last-minute purchases of a vote: yet the sentiment shows what an equally substantial group of Tory MPs thought of Johnson’s capabilities, and explains why the anyone-but-Boris movement sprang into action the instant Cameron ran up the white flag. They knew that, for all Johnson’s failings, and there are many, he has the entertainer’s knack of making people love him. Sadly – and this is the part his adoring public doesn’t see – things can be very different when he enters his dressing room and starts to take off the make-up. As Sir Alan Duncan said forthrightly last weekend, there is the small matter of Johnson lacking the gravitas and experience to be a credible prime minister, something MPs should have the wit to take into account even if the party in the country at large does not.

The Johnson phenomenon is not the least reason why even some of Cameron’s most consistent critics did not call for him to resign if he lost the referendum. The more time the Tory party had to consider Johnson as a potential leader, and what that entailed, the better. Some MPs are angry that Cameron did not take immediate responsibility for cleaning up the mess he had helped make and preside over the exit negotiations. His colleagues feel he simply couldn’t be bothered, which is consistent with the often idle way he ran both his opposition and the government – an idleness that prevented him putting any contingency plan in place. The grand gesture, the great claim and the sweep of rhetoric are very arresting, and take little time. Following through is harder: but Cameron has a long record of not considering the consequences of words and actions, and this debacle for him is the ultimate, and most spectacular, example.

The pessimism that Johnson’s detractors felt about stopping him rested in what they knew and saw of the self-interest of their more bovine colleagues. The first concern of one group is to back the winner, and they came to think that would be Johnson (something with the status, in those circumstances, of a self-fulfilling prophecy). They also thought that should Labour find a new leader and become a serious opposition, Johnson was the man most likely to win an election. Whether that would come next spring – if the new leader sought a new mandate as Gordon Brown did not in 2007 – or in 2020, as the Fixed-Term Parliaments Act decrees, is a separate but important question. Johnson’s acolytes let it be known he would not call an early poll. He (or any other leader) would be absolutely constitutionally justified in not doing so. More to the point, you do not plot from the womb to become the Queen’s first minister only to risk chucking away the key to the Downing Street drinks cabinet after a few weeks. However, a weakened Labour Party may prove an irresistible target, and Tories recall how history would have been different if Gordon Brown had gone to the country in the autumn of 2007, as many urged him to do.

The press – and not just on the left – could well have given Johnson a hard time. His baroque private life has exhausted its capacity to shock, but there is scope to scrutinise his record of underachievement as mayor of London; or Michael Howard’s sacking him for lying; or the Times sacking him for making up quotations (from his godfather) in a story; or his offering to assist his old schoolfriend Darius Guppy in having a journalist who had disobliged Guppy beaten up. 

The manoeuvring May

Theresa May’s ambitions have been barely concealed. She has been “on manoeuvres” since the 2015 general election. She worked out that the best way to manoeuvre during the referendum campaign was to say nothing, to avoid becoming a divisive figure. Aside from some rare moments of half-hearted support for Remain, that is exactly what she did. Had she gone the other way, the leadership contest might have seemed closer, because her seniority and experience would have matched Johnson’s charisma. As it was, until Johnson pulled out, the best her colleagues believed she could hope for, barring some dramatic development, was to come second. A Times poll on Tuesday said that Tory voters preferred her to Johnson, which had the smell of accuracy about it. Activists – those with a vote – are a different matter. They appear in no mood at the moment to elect a Remainer.

Yet they are in some measure in the mood to elect a unifier. For all his attempts at sober statesmanship since the vote, Johnson (given his past) would have had to stretch credulity even more than usual to convince as one of those. The anyone-but-Boris movement has been motivated by the list of his perceived offences and character defects. Few believe he would have plumped for Leave had he thought it would lose: Johnson’s years on the rubber chicken circuit, and his mailbag from Telegraph readers in the provinces, made him more aware than most of his metropolitan colleagues of the true nature of public feeling outside the bubble. He is seen as utterly flexible in terms of principle: and, from the nature of his campaign rhetoric, as disloyal, cynical and lazy. Critics recall the number of deputy mayors (seven at one point) he required to do his last job. He is widely considered untrustworthy.

Perhaps he could have unified activists who seem near universally to admire his carefully manufactured persona: he would have found it harder to unify the parliamentary party, and would probably require a resounding general election victory before doing so. Even then, doubts born of years of witnessing his buffoonery and prevarication would be hard to allay.

The unifiers

MPs felt that two other Brexiteers had far better credentials as unifiers. The most obvious was Michael Gove, whom some tried to persuade to stand; but until today Gove had signalled his willingness to throw in his lot with Johnson.

The other increasingly discussed name in the days after the referendum was Andrea Leadsom, the energy minister and, before that, economic secretary to the Treasury. Many even in her own party never thought of her as a potential leader until recent weeks: but these were weeks in which she showed her key virtues. She is intelligent and capable. She had a long career in business before entering government, and presents a happy contrast to ministers who spent their lives as special advisers before gracing the back benches. Leadsom is deeply principled but also reasonable: she abstained in the vote on same-sex marriage because she did not want to show a lack of respect to homosexuals and lesbians who wished to solemnise their relationships, but she could not support the notion because of her religious views. Remainers consider her to have performed uniformly well in debates and television interviews during the EU campaign, because she avoided personal attacks, spurious claims and wild threats.

She is popular with her colleagues. However, if she has let her name go forward she will start from the back of the field. It would require the sort of organisation that enabled Mrs Thatcher to beat Ted Heath in 1975 if she were to pull this off. However, should Johnson implode during this campaign, and she had become a candidate, she would be fabulously well placed to pick up his voters.

May would seem to be way ahead as the Remain candidate, but will have to earn that position in the hustings that will run over the summer. The dark horse is Stephen Crabb, who replaced Iain Duncan Smith at Work and Pensions, in league with Sajid Javid, a secret Leaver who called it wrongly and who is now trying to salvage his future. A self-deprecating man from a humble background and with few enemies, Crabb, who was previously Welsh secretary, reminds me of John Major, who was brought into the cabinet and rose rapidly. In a leadership campaign held in the middle of a parliament, Major won and became prime minister, trading heavily on a backstory of his unprivileged upbringing. He may be the man May must beat.

George Osborne has ruled himself out but remains relevant. He wants to carry on in government and, like the overgrown student politician he is, may be about to make an accommodation with those he has denounced for months in order to continue to hold a senior post. Also, not least because of Cameron’s laziness and casual attitude towards his party, he had exercised a substantial and growing influence over patronage and especially over senior government appointments. He had made a point of getting to know MPs on the way up, not least because he expected to be prime minister and wanted to be sure he had a clientele of loyalists to support him. He was starting to appoint his ministerial team, in effect, before becoming prime minister.

Osborne’s prospects have crashed, but his machine remains, for the moment, intact. If he has chosen wisely, he has a group of loyalists whom he can deploy in support of the candidate he chooses. However, now he can be of no use to his clients, it will be interesting to see whether they take the blindest bit of notice of him.

There was talk of Johnson making him foreign secretary, which would show an advanced sense of humour, given the role that person might have to play in the exit negotiations. Gove, if he had thrown in his lot with Johnson, might have ended up as chancellor.

The party is so fractious that the next nine weeks could provide a roller coaster: any talk of going back on the idea of strict border controls, for instance – something Johnson hinted at – could cause huge turbulence. I suspect we are about to find that conducting a leadership contest at any time is a project laced with tension; to conduct one in a climate of scarcely concealed hysteria is not least why anything could yet happen.

Simon Heffer is a columnist for the Daily and the Sunday Telegraph

Simon Heffer is a journalist, author and political commentator, who has worked for long stretches at the Daily Telegraph and the Daily Mail. He has written biographies of Thomas Carlyle, Ralph Vaughan Williams and Enoch Powell, and reviews and writes on politics for the New Statesman

This article first appeared in the 30 June 2016 issue of the New Statesman, The Brexit lies