We need active government to revive our retail sector

Without immediate stimulus, we risk inflicting permanent damage on our retailers.

These are tough times for one of the UK’s most successful and innovative sectors: retail. Whatever else we were up to during the Olympics, we weren’t shopping – figures from the ONS this week show that retail sales actually fell in August compared to July, with the hoped-for Olympic retail bounce sadly not materialising. The underlying picture is of an industry which, despite being worth more to our economy than the whole of the manufacturing sector, and employing one in ten workers, has still not recovered its 2007 position relative to other sectors. 

As I said when I addressed more than a thousand industry leaders at the British Retail Consortium’s Annual Dinner this week, this is not for want of trying. Retailers come from all over the world to walk through British stores to gain inspiration and to poach ideas. This leadership is not just in conventional retail. As more and more commerce moves online, British retailers are adapting fastest, with a greater share of goods bought online in the UK than in any other major market.

The biggest problem for the retail sector is that it is the consumer-facing end of an economy hit by the recession made in Downing Street. Householders facing a squeeze on their incomes today and lacking confidence about what the future might hold are, understandably, reluctant to spend. The longer this economic malaise continues, the more our national debt will rise and the more permanent damage it will do to our economy. In practical terms, this means the drying up of investment in future capacity, the scarring effects on young people whose first experience of the labour market is unemployment, as well as the decline in the skills of those who have lost their jobs.

We must bring the public finances into balance as soon as we can. But a stalled economy today means that borrowing is rising, and the ambition of fiscal balance is further away. In the meantime, we are all worse off today and the future success of our economy is held back. 

That is why Labour is calling for an immediate stimulus through our five-point plan for jobs and growth. These are common sense measures, each one backed by business, based on the right diagnosis. A temporary VAT cut, like that introduced by Alistair Darling in 2008, would make a real difference, getting the economy moving, orders on books and cash registers ringing once again.

In difficult times, our retailers are working hard to respond to the changing demands of consumers, who are increasingly shopping through multiple channels, at all times of day and night, and are becoming more focused on the shopping ‘experience’: not just on the value of a brand, but also on the values it represents. These trends offer big opportunities for companies willing to rise to this challenge – and increasingly it is retailers leading the way.

So, we see retailers embracing their responsibilities to the environment, realising the opportunities of this approach and valuing their customers as partners in this task, alongside taking an active interest in improving their local communities by considering their impact on the areas in which they operate and looking for ways to source more locally. This is better for our society and better for the environment. But it is good business too. 

These are exactly the kinds of models, practices and behaviours that Ed Miliband is talking about in his call for a more responsible capitalism: more firms focused on building value for the long term, which value and nurture their employees – such as the fantastic joint working with the trade union Usdaw in the retail sector – and seeing economic strength and social responsibility as two sides of the same coin.

This trend reflects businesses being moved to act responsibly in their own interest, delivering value for their firms and society in general. But government has responsibilities too, in supporting firms in making these choices. That is why the successful future for the British economy must be built on a true partnership between productive business and active government, responding to each sector’s specific needs and circumstances.

With the right action from government, working in partnership with business, I have no doubt we can get Britain back on the right path – growing again, competing again, pulling together, not pulling apart.

Despite the Olympics, retail sales fell in August compared to July. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham.

Photo: Getty
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Donald Trump's threats give North Korea every reason it needs to keep nuclear weapons

The US president's warning that he may “totally destroy” the country is a gift to Kim Jong-un's regime. 

Even by Donald Trump's undiplomatic standards, his speech at the UN general assembly was remarkably reckless. To gasps from his audience, Trump vowed to "totally destroy" North Korea if it persisted with its threats and branded Kim Jong-un "rocket man". In an apparent resurrection of George W Bush's "axis of evil", the US president also declared: “If the righteous many do not confront the wicked few, then evil will triumph". 

For North Korea, Trump's words merely provide further justification for its nuclear weapons programme. Though the regime is typically depicted as crazed (and in some respects it is), its nuclear project rests on rational foundations. For Kim, the lesson from the fall of Saddam Hussein and Muammar Gaddafi was that tyrants pay a price for relinquishing their arms. The persistent threats from the US strengthen the regime's domestic position and reinforce a siege mentality. Though North Korea must be deterred from a pre-emptive strike, it must also be offered incentives to pursue a different path. 

As Trump's Secretary of State Rex Tillerson remarked last month: "We do not seek a regime change, we do not seek a collapse of the regime, we do not seek an accelerated reunification of the peninsula, we do not seek an excuse to send our military north of the 38th Parallel. We are not your enemy... but you are presenting an unacceptable threat to us, and we have to respond. And we hope that at some point they will begin to understand that and we would like to sit and have a dialogue with them."

The present nadir reflects the failures of the past. In 1994, the Clinton administration persuaded North Korea to freeze its nuclear programme in return for economic and diplomatic concessions. A communique declared that neither state had "hostile intent" towards the other. But this progress was undone by the Bush administration, which branded North Korea a member of the "axis of evil" and refused to renew the communique.

The subsequent six-party talks (also including China, Russia South Korea and Japan) were similarly undermined by the US. As Korea expert Mike Chinoy records in the Washington Post in 2005, the Bush administration provocatively "designated Macau's Banco Delta Asia, where North Korea maintained dozens of accounts, as a 'suspected money-laundering concern.'" When a new agreement was reached in 2007, "Washington hard-liners demanded that Pyongyang accept inspections of its nuclear facilities so intrusive one American official described them a 'national proctologic exam'".

For North Korea, the benefits of nuclear weapons (a "treasured sword of justice" in Kim's words) continue to outweigh the costs. Even the toughened UN sanctions (which will ban one third of the country's $3bn exports) will not deter Pyongyang from this course. As Tillerson recognised, diplomacy may succeed where punishment has failed. But Trump's apocalyptic rhetoric will merely inflate North Korea's self-righteousness. 

George Eaton is political editor of the New Statesman.