The sun may be shining, and the state of the rest of the economy may be getting better, but the news from the high street just gets worse and worse.
On Monday, the computer games retailer Game went into administration, putting at risk the jobs of more than 5,000 staff at over 600 shops around the country. That follows a terrible Christmas and New Year, when a whole string of big retail names – La Senza, Peacocks and Past Times – all ran into trouble. The accountant Deloitte predicted last week that as many as 40% of British shops might be forced to close in the next five years.
As more and more shops close down, we can expect to hear plenty of calls for help. The government will be launching enquiries and lobbyists will be arguing for tax breaks and subsidies to keep shops alive. It’s all nonsense. In fact, the high street should be allowed to die a quick and dignified death.
There is little mistaking the sense of crisis in the retailing sector. Every month seems to bring news of another familiar name hitting the wall. Game is merely the latest in a long line of casualties. Names such as Zavvi and Borders have already disappeared.
Meanwhile, Argos, while still healthy enough, has reported a sharp fall in sales. Even the mightiest retailer of them all, Tesco, is starting to struggle with its British operations. At this rate, a nation of shop-keepers might soon just have a couple of corner shops left.
Worse, the evidence of decline can be seen on every high street. More and more traditional shopping centres are turning into an unpleasant mix of boarded-up windows, 99p stores and charity outlets. The latter only survive because they don’t pay business rates, or their staff, and usually don’t pay for their stock either. As a result many town centres are becoming desolate, unappealing places.
That in turn only accelerates the problem. As the high street gets nastier, fewer of us bother to go there and the shops that remain struggle even more. As things gets worse, we can expect dozens of government-led enquiries – mostly run by Mary Portas – on how to save retailing.
Imaginative lobbyists will start dreaming up all kinds of wheezes to keep shops alive. Reductions in business rates. Lowering VAT. Exempting retail staff from national insurance contributions. All will probably be put forward as ways of stopping shopping centres turning into wastelands. But do we really need to save the high street?
True, there are some problems we can fix. Many high-street chains were over-loaded with debt by the private-equity firms – and it is their balance sheets that are killing them off rather than a collapse in sales. Every time a chain goes bust, it is often the financing costs that prove to have been the final straw. The private-equity houses thought cash flows in retailing were rock solid – and forgot that businesses have to have a balance sheet that can survive tough times. Once that debt is restructured, many retailers will be in better shape.
On top of that, many local councils have used parking charges as a form of backdoor taxation. It costs crazy amounts to park, and wardens are paid bonuses for handing out tickets. Sure, it raises money. But it also stops people from driving into town – and if that means shops close, and jobs are lost, it is hardly a constructive way of raising money.
That said, it is clear that retailing is going through a massive structural change. As Boston Consulting Group pointed out last week, Britain has the largest internet economy in the world, accounting for 8.6% of GDP. The British have taken to the web enthusiastically.
Music and films have seen the most dramatic shift, with more than half of CDs and DVDs now bought online, and that excludes downloads. Books are going the same way – and that is before you take account of all the people reading on Kindles, none of whom will go to a bookshop.
Electrical goods sell massively online and so does clothing. According to Deloitte, 22% of us bought our last item of clothing online. Even supermarkets are seeing a shift, as the huge growth in home delivery services have shown.
It isn’t hard to understand why. The internet is a more efficient conduit between manufacturers and customers than a vast network of shops. You don’t have to employ large numbers of staff or own huge numbers of buildings, all of which have to be maintained, heated and taxed. The online retailers can offer a far wider range of stuff at cheaper prices – and people don’t have to use up expensive petrol going to get it. It is hardly surprising the web is taking over.
There is no worse policy than trying to keep alive a structurally dying industry – whether it is ship building, coal mining, or, indeed, Scottish banking. Now it’s time for the traditional British high street to be allowed to die.
Most town centres were originally a mix of residential, light industrial, commercial and retail space. If you look at the way they were planned, they had a blacksmith, a couple of pubs, some market space, a few offices, and some houses that people lived in. It was only post-war that the typical British high street became a long row of chain shops that are no longer needed.
The best response would be to relax the planning laws. As shops shut down, turn the buildings into offices, small factories and workshops, and most of all houses. People need places to live, and small companies need places to make things. Fill town centres with those, and they could be bustling hubs once again – just with hardly any shops in them.