Join me, if you will, for a stroll along London’s Oxford Street. Walking westwards from Oxford Circus, the block that was once BHS is still there, but the department store is long gone. Next you’ll pass John Lewis; even this usually irrepressible retailer says it will make “close to zero” profits in the first half of this year and will be closing five Waitrose stores.
Further on, there’s the flagship House of Fraser store – now due to be culled along with more than half of the brand’s 59 UK outlets. Next there’s Debenhams, another venerable name with problems of its own, prompting its management to slim down 30 of its stores owing to “exceptionally difficult times in UK retail”. Finally, you’ll see Marks & Spencer’s Marble Arch store – it’s not one of the 100-plus that the firm will close by 2022, but M&S has yet to confirm the identity of 65 of those.
For Britain’s retailers, 2018 will be forever recalled as an annus horribilis – certainly the worst since the 2008 financial crisis. This year alone, Poundworld, Toys “R” Us and Maplin have gone bust, and Carpetright, New Look and Mothercare are seeking a company voluntary arrangement to forestall that fate.
The resulting rationing of the high street has claimed or threatened 50,000 jobs so far. And it’s only July.
What’s unfolding is a perfect storm for British retailers, which employed nearly five million people and accounted for 11 per cent of UK economic output in 2016. As well as pressure from online competitors – websites now account for a quarter of all non-food sales – consumers have been reducing spending in the face of Brexit, while the fall in the value of sterling has cut retailers’ profit margins. Added to this is the rise in business rates and rents, and the challenge from low-cost firms such as Aldi, Lidl and Primark.
“I don’t think things have got as bad as they could be,” warned Professor Joshua Bamfield, the director of the Centre for Retail Research, who has been analysing the retail market since 1978. “It’s going to carry on with this level of decline for the next four or five years.” Bamfield forecasts 10,000 store closures in 2018 and the loss of a remarkable 382,500 retail jobs by the end of 2022. By then, we should be nearing the end of a transitional phase as traditional bricks and mortar retailers evolve into hybridised high street and digital retailers that have a much smaller physical presence.
As well as citing the rise in business rates, Bamfield believes retailers bear some of the responsibility for failing to adjust to changing consumer habits. But he also blames corporate structures that too often leave chains saddled with repaying the “overhanging debt” created by their own acquisition.
Over at Usdaw, the shop workers’ trade union, the new general secretary Paddy Lillis was unsurprisingly anxious about the challenges facing his 429,000 members. “There’s no respite,” Lillis told me. “It’s worrying for our members and their families, but more worrying is that there doesn’t seem to be any political strategy to try to redress this imbalance.”
The specific imbalance is that between bricks and mortar retailers and the online behemoths. The former, in particular, are penalised by higher town centre business rates and rents, irrespective of turnover, while also paying corporation tax on any profits. “There needs to be a level playing field for them to operate in and, at present, that’s not the case,” Lillis said. “The bricks and mortar retailers are paying a heavy price and the Amazons of this world are taking advantage.”
He wants national and local government, unions and employers to form a task group to ensure “that we protect the high street where we can, that we protect the good wages, and more importantly good training”.
“If we’re really serious about this sector of the economy, then there has to be a really serious look from all parties, otherwise we’re going to see more of a demise,” Lillis added. “I’m more worried by Brexit and the implications that’s going to have. We’re going to see lots of these employers going to Europe and we’re going to see another downward spiral of the British economy.”
Another of those demanding action is Bill Grimsey, the former boss of Wickes and Iceland, who last week unveiled his own plan to save the high street – subtitled “It’s time to reshape our town centre”. It called for urgent reform of business rates – “a tax that’s universally hated because it’s unfair, archaic and out of control” and which is “bleeding the high street dry”. (Retail accounts for around £8bn of the annual £29bn the Treasury receives from business rates.) The New West End Company, an alliance of London retailers, hoteliers and property owners, has estimated that M&S, a firm with a turnover of £9.6bn last year, paid £184m in business rates, whereas Amazon, with smaller UK revenues of £7.3bn, paid just £14m.
Grimsey also wants penalties for landlords who leave town centre properties vacant, and reformed rules to make it easier for property use to be varied.
But he also frankly acknowledged that online competition means some shops are surplus to requirements. “Bricks and mortar retailing can no longer be the anchor for thriving high streets and town centres,” he wrote. “They need to be repopulated and refashioned as community hubs, including housing, health and leisure, entertainment, education, arts, business/office space and some shops… If we don’t [find a solution] then communities will pay a heavy price and a key part of our national character will be lost.” Grimsey fears that the UK “will no longer be a nation of shopkeepers” and that Britain will be permanently poorer.
For a glimpse of the future, return to the former home of BHS on Oxford Street. Occupying 20,000 square feet is Swingers, a trendy venue with two nine-hole crazy golf courses, several bars and food outlets, all designed in 1920s English Riviera style. And after some golf, how about a bit of shopping?
Alec Marsh is the editor of Spear’s magazine
This article appears in the 11 Jul 2018 issue of the New Statesman, The Brexit farce