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.

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