Georgina Smith discusses the effects of the current economic and political climate on the retail industry
The knock-on effects of the recession have had a significant impact on the retail, shopfitting and interior contracting sectors. It has been a tough couple of years to say the least, with fragile conditions in the financial markets leading to the closure of several well-known high street chains. Consumers, as well as retailers have been unnerved by the political climate, and 2010 has already turned out to be a historic year for the UK with the Conservative Party joining forces with the Liberal Democrats to form a coalition Government. The retail sector, along with the rest of the country, waited with baited breath for the outcome of the general election, and is now asking: how will a coalition government stabilise the economy?
Director of the National Association of Shopfitters (NAS), Robert Hudson, believes we are far from being economically stable:
“The spin doctors will tell you that we are officially out of recession based on one set of figures, yet ‘wake up and smell the coffee,’ 2010 will possibly prove even more challenging for everyone in the sector, as it will for retailers, house builders and UK companies in general.”
So far the new Government has focused on spending cuts to lower the national debt, rather than tax rises, which would adversely affect retailers. How the Government deals with issues such as a potential rise in VAT and National Insurance will become clearer when the emergency budget is held in June.
Robert Hudson claims that political deadlock had unnerved consumers and kept them fixated to the media. High street retailers complained that people simply stopped spending once the hung parliament had been announced. Robert Hudson went on to say:
“I would ask you to reflect on the coalition of Martin McGuinness and Ian Paisley recent sworn enemies now known as the ‘Chuckle Brothers’. The new political horizon would suggest that we may be missing something? Considered opinion would point to an improvement in consumer confidence because the detailed negotiations between the parties indicate a greater clarity in the resulting policy.”
The British Retail Consortium (BRC) believes that a rise in VAT to 20 per cent would result in lower margins for companies, leading to cutting costs and jobs. It claims that a rise would reduce the deficit by £11.3bn but by the end of that first year there will be 30,000 fewer jobs in the UK, and consumer spending would be £1.6bn less than it would have been without the rise.
BRC director general Stephen Robertson said: “For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth.
“The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information,” he added.
Figures published from The Local Data Company’s (LDC) Openings & Closure Report 2009, revealed that 10 per cent of retailers closed during July-December 2009. From a survey of 251,462 firms across over 700 town centres across the UK, 25,090 closed. In London alone, 7,628 firms shut their doors in the first nine months of the year.
Francis Salway, chief executive of Land Securities, one the UK’s largest developers, who opened Cardiff’s new shopping centre at the end of 2009, admits the downturn has been tough for property companies and retailers, commenting:
“There are instances of retailers still asking for concessions, and it can be in our interests to show flexibility in specific areas – and we have led on a number of such initiatives. However, we do not believe across the board changes to agreed contracts are appropriate.”
2009 was a tough year for the retail market across the board, which has had a significant impact on designers, contractors and shopfitters alike, however it is important for the industry not to dwell on the past.
By the end of 2010 it is highly unlikely that the UK will have come out of the recession completely, but many new high street stores are opening across the UK and established brands are finding new and innovative ways to get ahead in the refurbishment market. They may not be on the same scale as a development such as Westfield, London but it is a positive sign that the retail industry is moving forward.