A new report is warning that the retail sector could be in crisis, with the worst effects of the recession yet to come. This is worrying for Tower Hamlets, which is relying on regeneration of Bow Road shops to perk up the Bow area – and which sees many school leavers aspire to working in the retail sector. Also at risk are the shopping malls of CanaryWharf (pictured).
The report which has issued this alert is Retail Futures 2018, produced by Professor Joshua Barmfield from the Centre for Retail Research (CRR) – and it makes bleak reading, with the following predictions.
•One in five high street stores could disappear in the next five years
•As the crisis grows, 61,930 high street stores across the UK could cease trading, causing 316,000 job losses by 2018 – which, alone, would see the UK unemployment rate increase by nearly 13%.
•While London is likely to experience less of a problem than other regions, retail losses could still rise to 10% – which would, in turn, impact on neighbourhood and convenience stores.
•Hardest his will be pharmacy and health & beauty outlets (up to 35% at risk), with shops selling music, books, cards, stationary and gifts just behind them – in joint place with shops in the DIY sector (29% of stores at risk in these sectors).
The report gives a number of reasons for the retail downturn.
•Consumer spending has increased by 12% since 2006, but operating costs have risen nearly twice as fast (by 20%), forcing many retailers, particularly those operating on narrow profit margins, to the wall.
•Online purchasing now accounts for a higher percentage of retail, particularly of high value goods, than previously.
•The downturn arises not only from the national economic situation, but also from the Government’s response to the crisis – ever greater austerity measures, rather than attempting to reflate the economy. Since the start of 2013, 16 major retailers have gone into administration: between them they run nearly 2,000 shops employing nearly 15,000 staff. The report warns that with the UK economy failing to grow, a further 164 companies could cease trading over the next five years – with a total of 140,000 jobs directly affected.
The report reflects the impact of the national economy in its suggested remedies: instead of calling for measures to subsidise retailers, it calls for investment in small scale developments of homes and some transfer of shops to leisure or service use. This would provide more users for the retail sector and help support shops without artificial subsidy.
It’s not rocket science. When the Government proclaims that it has imposed a below-inflation pay rise on public sector workers, it expects everyone to think it is managing the economy well. However, a “below-inflation pay rise” is a cut in wages, and outside their working hours public sector workers become consumers – who therefore have less money to spend and start cutting back on what they buy, triggering a crisis in retail. If we are to bring the economy out of recession, we need more public spending just now, not less. If the Government won’t do a U-turn to save the economy, we can only assume they are determined to keep the recession going as long as possible – but that’s another story…