Retail 2009

High noon on the High Street

Gloomy, bleak, dismal, grim - take your pick of depressing-sounding adjectives that describe the outlook for the UK high street in 2009. From the collapse of big names such as Woolworths, Land of Leather and Waterford Wedgwood to the hundreds of smaller, independent retailers expected to go out of business this year, 2009 looks like being one of the worst on record for the UK's high streets.

The Federation of Small Businesses goes as far as claiming that the UK economy is on the brink of an economic downturn on the scale of the 1974-1975 recession or, worse still, of the Great Depression of the 1930s. Accountancy firm BDO Stoy Hayward estimates more than 120 small firms are going into administration each week in the UK and, while nothing like the 1990s when 1,000 small firms a week went to the wall, the signs are ominous.

The facts are these: UK retail sales values in December fell 3.3% on a like-for-like basis compared to December 2007. The big Christmas losers were DSG, owner of Currys and PC World, who saw sales drop 10%, Argos with sales down 7.5% and Halfords, down 7.8%. Homebase and Argos owner Home Retail Group also announced heavy sales falls for both businesses. Some firms did well: Primark up 21%, Carphone Warehouse up 13% and William Hill up 8%, but it's hardly reassuring news.

The British Retail Consortium (BRC) says it is the worst set of December figures since it began the survey 14 years ago. It found food was one of the few sectors to show sales up on a year ago - people still need to eat, after all - but most other sectors did badly and heavy discounting influenced what gains there were.

Why does it matter? Well, in 2007, UK retail sales were £265bn, larger than the combined economies of Denmark and Portugal. They account for one-fifth of the UK economy and the retail sector generates almost 8% of the Gross Domestic Product of the UK. There are roughly 300,000 retail outlets in the UK and the industry employs close to three million people. So yes, it matters.

Retailers are being hit with a double whammy. On the one hand, and despite government efforts, bank lending has seen a dramatic fall and companies operating with large debts are having difficulties refinancing. On the other, with economic uncertainty and widespread job losses, UK consumers are opting to keep what money they have in their pockets.

Yet this is about more than shops going out of business and people losing jobs, as depressing as that is for those concerned. One imponderable aspect to the slow death of the high street in 2009 is the impact it will have on the wider community. While vibrant communities often boast vibrant, busy high streets, the opposite can also said to be true. Boarded-up shops are often associated with social deprivation, crime and a weak local economy.

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