Politicians and Retailers are Still in Denial as they Focus on Window Dressing

Once again retailers have blamed the weather for stagnant sales, only this time it was a couple of weeks of unexpected sunshine in September rather than the three weeks of snow that were blamed for dire pre-Christmas sales last year.

Both politicians and retailers are still in denial about the High Street. Most initiatives are aimed at stimulating consumer spending whether discounting or sales, talking up the recovery and promoting spending or window dressing by Mary “Queen of Shops” Portas.

The fact is that consumers in the UK are undergoing a huge change in their approach to consumption and credit. They are spending less on unnecessary goods and this in turn is having an adverse impact on retailers.

Over the last thirty years our excessive consumption has driven the UK economy, creating the illusion of growth while all the time we became ever more dependent on the retail sector. Our consumption based growth was fuelled by ever more debt, not just personal debt but national debt, creating an ever increasing huge balance of payments deficit. This combined debt, consumer, corporate and national borrowings, represents 466% of UK GDP.

However the debt has to be repaid, and we have finally faced up to this harsh reality, paying back a net £200 million in September according to the British Bankers Association.

Companies like JJB Sports, Jane Norman, TJ Hughes, Walmsley and Alexon with its 990 shops all recently joined a growing list of struggling companies going bust, while the Home Retail Group, owners of Argos and Homebase, has reported pre-tax profits down 72%.

We need to challenge the notion that all these high street retailers should survive. If we are going to consume less, can we sustain the current number of retailers?

In addition to adjusting their UK retail business models some, including Debenhams and Argos, are focusing on international expansion.

As turnaround specialists we are arguing that we need a vision, we need export oriented manufacturers and services to effect a transformation if we are to become a producer economy with a balance of payments surplus.

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