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We need active government to revive our retail sector

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

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

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.