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
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.