Skip to main content

The retail disaster waiting to happen

Last week, administrators for Woolworth’s stated that unless a miracle happened over the Christmas period, its 800 stores would close in the New Year with the loss of over 28,000 jobs across the UK and potentially another 100,000 to 120,000 jobs in related businesses. At the same time, it was confirmed that MFI would be closing its stores, with the loss of 1,400 jobs.

Whilst we hear in the news of factories shutting down across the region, these are often hidden away on industrial estates outside town centres. Therefore, for many in Wales, the closure of Woolworth’s will be the first tangible sign that a deep recession is on the way as high streets find their biggest store boarded up and empty.

Apart from the employment impact, economists are predicting that it could have a serious knock on effect in our smaller towns in the New Year as consumer footfall decreases and demand is depressed at the quietest time of the year.

Indeed, the first few months of 2009 may end up being a bloodbath for the retail sector in the UK, especially given the recent results from a range of companies. For example, DSGi – the owners of both PC World and Curry’s – reported a seven per cent fall in sales, with similar drops at other major retailers such as Land of Leather (forty seven per cent) Carpetright (thirteen per cent), JJB Sports (eighteen per cent) and Comet (thirteen per cent).

Of course, in the run-up to Christmas, retailers have been discounting furiously and, as a result, their profits will be depressed at a time when they need every penny they can get. The main question for the sector now is who will be the next major retailer to go to the wall.

However, with headlines only reporting what is happening in large retail companies, it is easy to forget the thousands of small shops across Wales which remain the lifeblood of our high streets and are equally under pressure during this economic slowdown. In this worsening situation, the Welsh Assembly Government needs to consider its support for small retailers, something which has been largely ignored at the three economic summits held so far.

As we all know, while the Assembly Government does not have the power to cut business taxes, it does have the power to cut business rates. If our politicians are really keen to support independent retailers across Wales, then the least they can do, as this column as reiterated time and time again, is to re-examine the rate relief they offer to small businesses.

While every pound is critical to the survival of small firms, the time has come for the Assembly Government to instigate emergency measures and abolish, for the next twelve months, rates for all businesses with a rateable value of less than £10,000.

Certainly, this would be far more effective than much of the tens of millions of pounds being spent on business support and far less than what is usually offered to large multinational companies to relocate to the region. Most importantly, it will safeguard thousands of local jobs in our high streets with the minimum amount of bureaucracy.

If this does not happen, and an increasing number of small shops across Wales shut their doors for good in the New Year, then this will demonstrate, once and for all, that there is little understanding of the needs of businesses by our politicians in Cardiff Bay. Worst of all, they will have turned their backs on local retailers at a time when they need their support the most.

Comments

Anonymous said…
good piece Dylan, on the news yesterday it was reported that many more UK comapanies are putting off anouncing job losses and closures until the New Year, how much do WAG know abou what is coming i wonder but it makes little difference in Wales as our politicans and business leaders are in denial about the size and scale of problem as usual.
Anonymous said…
Whitards went tits up today
and have you seen whats happenig to business support- the WAG are withdrawing certain contracts - apparently the scene is different to what it was 8 months ago. They have dithered for 8 months to award these contracts now they are withdrawing them - they deserve sacking
And, since your post, it has been worse and worse on the retail front. I didn't expect to see 'creative destruction' on the High Street, especially when the Government's and the Banks' actions have much to do with undermining the confidence of many potential shoppers.
Back blogging due to a broadband lull in moving house so apologies for not replying sooner. Unfortunately, I think 2009 will be a meltdown for many companies and the first three months will see retail sales dry up outside of food and clothing. We need to get the banks lending again and for government to implement a loan guarantee scheme to ensure they do so. This is now about spreading the risks as banks will continue to ignore Government calls for supporting SMEs.
Chris said…
Dylan - you say "We need to get the banks lending again and for government to implement a loan guarantee scheme to ensure they do so."

Not sure about that, although it's fashionable just now.

Isn't the real mechanism interest rates? At the bottom end of the market shark-lenders will take anyone on who will pay a rate that's high enough, to the point that there's exploitation of the desparate, but if a bank wants (say) 8% instead of 5% from a savvy business to reflect the risk of not getting the money back, where's the harm in that?

The business then has to decide whether it can make an 8% loan generate enough profit to make the loan worthwhile. Surely this is better than banks not really being too bothered as to who they lend to, because HMG will pick up the tab if the loan sours.
Anonymous said…
Sharks and lending....finance wales come to mind

Popular posts from this blog

THE IMPORTANCE OF FRANCHISING

When we talk about start-ups and entrepreneurship, rarely do we discuss the potential of franchising not only as a way of establishing new ventures in the economy but also as a method of growing existing businesses. According to the British Franchising Association, franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor. The franchisee also receives initial training and ongoing support, comprising all the elements necessary to establish a previously untrained person in the business. This enables individuals to start their own businesses without having to develop their own ideas and utilising an existing brand and established market. Of course, whilst each franchise business is owned and operated by the franchisee, the franchisor controls the quality and standards of the way in which the business is

THE MANUFACTURING STRATEGY FOR WALES

Last night, I received the following comment on the previous post relating to a piece I had written back in early 2007 about the state of the manufacturing sector in Wales. "Dylan, you seem to be ignoring the fact that manufacturers in Wales have written the manufacturing strategy. Small and large manufacturers, all represented at the Manufacturing forum, have co-written this strategy. WAG has recently supported this strategy and have funded a co-ordinator with resources. Manufactures are happy with this progress as they are following the strategy they wanted. I know that the Conservatives have attacked the strategy as they seem to think that WAG wrote the strategy. They couldn't be more wrong. The Manufacturing Strategy was written by manufacturers, for manufacturers and is supported by WAG. If you don't agree with this, then I can invite you to the next Manufacturing Forum and you can explain to the manufacturers how their strategy is wrong....I appreciate that there is

THE PERFECT STORM FACING THE UK ECONOMY

In his sublime 1997 book on the fate of the fishing boat Andrea Gale, the author Sebastian Junger defined a “perfect storm” as a rare combination of events or circumstances that results in an unusually bad situation.  This term would not be out of place in describing what is currently happening to the UK economy which is being battered on so many fronts with little respite in sight. For example, the war in Ukraine has had an unexpected impact on energy bills in Europe due to the curtailing of exports from Russia which, last year, was responsible for supplying 40% of all natural gas to the European Union. Whilst the UK is not dependent on Russia for its energy needs, the scramble by other countries to find alternative sources has resulted in higher prices globally which has impacted on the fuel imported by the UK with normal suppliers struggling to meet demand. There have also been considerable supply constraints globally which have been driven by manufacturers struggling to get their g