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.

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Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.