A range of factors – from Brexit, to stagnant wages, to technological changes – are combining to create a toxic cocktail for the UK retail sector. Shop closures are another symptom of capitalism’s deep crisis.
The shock news at the end of last month that music retailer HMV had gone into administration for the second time in less than a decade came as an unwelcome Christmas present to its 2,200 staff, as well as many others inside the industry.
As Britain’s only remaining high street retailer of music and movies, HMV had accumulated a dominant position for itself. A household name for decades, the chain sells 31% of all physical music in the UK, along with 23% of all DVDs and Blurays. But this has not been enough to save it from going under again.
HMV’s collapse once again shines a spotlight on the crisis engulfing Britain’s high streets. It is the latest in a string of big names to go bust over the past 12 months. Some – such as Poundworld, Toys R Us, and Maplin – have disappeared altogether. Others – such as Homebase, Mothercare, and New Look – have been forced to restructure and close hundreds of stores.
The overall result is that the retail sector has been slashed. 93,000 retail jobs were lost in 2018 – over 3% in what is Britain’s largest private sector industry in terms of employment. “I think the UK in 2018 has probably seen the worst year that I can remember,” says Sir Ian Cheshire, the former CEO of B&Q, now chairman of Debenhams.
And the year ahead is likely to offer little respite, with other important retailers such as House of Fraser and Debenhams (amongst others) teetering on the brink. The Centre for Retail Research reckons that retail job losses will increase by at least 20% this year, affecting the jobs of 160,000 people. Meanwhile, the British Retail Consortium has previously warned there could be up to 900,000 fewer jobs in retail over the next decade.
Long-term technological changes have obviously had a big impact, and will continue to do so, with more and more shopping being done online (one in every five pounds is now spent via the internet).
Similarly, the uncertainty surrounding Brexit has taken its toll, with many consumers holding off big purchases until the situation has stabilised. At the same time, a weaker pound has increased the cost of imports for retailers.
Companies such as Toys R Us and Maplin are also notable examples of “zombie capitalism”: businesses kept alive by a drip-feed of cheap credit. Such firms have staggered on in recent times thanks to low interest rates. But as costs mount and sales fall, such debts have become unmanageable.
Britain’s high street crisis, however, is ultimately a reflection of the general crisis of capitalism. Markets everywhere are shrinking as the bosses attack workers’ wages in order to boost profits, and as governments carry out austerity to reduce public debts. This reduces economic demand and bites into consumer spending. At the end of the day, there is only so long that households can rely on credit cards for their shopping.
In short, the retail sector is facing a perfect storm – one that is not likely to let up any time soon.