Still awaiting the retail recovery

New figures out today show that the retail sector shows no signs of leaving its post-2008 slump

The retail sector today becomes the latest to report that they see no signs of an economic recovery on the horizon.

The February edition of the British Retail Consortium's (BRC) retail sales monitor shows that overall spending is up 2.3 per cent on last year, but taken on a like-for-like basis (a measure that excludes shops which have opened or closed in the past year, removing variation in floorspace as a source of change) it has dropped by 0.3 per cent.

KPMG co-publish the report, and their head of retail, Helen Dickinson, said:

Consumers remain reluctant to spend unless encouraged by promotional activity. Thus, while the market is still growing slightly in headline sales terms, profitability continues to be eroded through loss of margins.

The growth in non-food non-store sales - mail order, phone, and, increasingly, internet - dropped from earlier months, but still far outstripped the headline figures. At 9.9 per cent year-on-year, even a bad month still represents a strong future for the subsector.

A similar pattern in the US has led Slate's Matthew Yglesias to ponder whether they are seeing "the end of retail":

Tolstoy wrote that each unhappy family is unhappy in its own way, but while each troubled big-box chain has a unique story, there’s a common enemy: the Internet.

Online retail sales this past November and December were up 15 percent compared with late 2010. In the third quarter of 2001, e-commerce sales were 3 percent of all retail (including food) sales in America. By the third quarter of 2011 (i.e., before the Christmas surge was fully incorporated into the data), that was over 12 percent. The move toward online shopping is relentless, driven by both convenience and the ability of Web-based retailers to largely avoid paying sales taxes. As mobile devices become even more useful for shopping, online retailers will grow faster.

The director general of the BRC, Stephen Robertson, doesn't quite agree with Yglesias' analysis, saying:

Online continues to grow faster than any other retail channel but the rate of increase in sales has slowed since Christmas and is well down on the kind of performance that was typical in 2010 and before.

Non-food sales have been worst affected by customers’ continuing fears about their own finances and prospects. That’s being felt online as well as in stores but the slowing of online growth may now also be reflecting some maturing of the market.

Whether or not the online sector is reaching maturity is precisely the issue at hand. It does seem like there is an element of wishful thinking on the part of Robertson, since year-on-year growth of almost 10 per cent is hardly representative of a mature industry.

But to see whether there is a genuine threat to brick-and-mortar retail, we'll have to wait until the sector as a whole regains its growth. If a significant proportion of the recovery gets taken up by the online outlets, then the rest of retail will really have to start worrying, and to know that requires a recovery which has been a long time coming.

The Amazon warehouse in Swansea, in the run-up to Christmas. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign.

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation