UK recovery, but not on the high street
It was only a few days ago that George Osborne declared victory on economic malaise saying that the UK economy has turned a corner. The economic data has improved dramatically in the last six months, which gave Osborne a battering ram to launch a political attack on the Labour Party. Osborne used his moment in the sun to prove Ed Balls and all on the other side of the political bench wrong, saying that his austerity programme is right for Britain.
However, a little over 24 hours after Osborne’s speech a report from the Local Data Company made for uncomfortable reading as it detailed grim conditions on the UK’s high streets. High Street vacancy rates remain stubbornly high; out of 650 town centres in the UK the average vacancy rate is 14.1 percent, which is basically unchanged since February.
The regional breakdown was even more depressing, the vacancy rate in Wales is more than 17 percent, and Scotland’s rate is above the average. The worst case is Blackburn where more than a quarter of shops are vacant.
The decline of the British high street is nothing new. Shopping online is easier than ever with smartphones and tablets making it easier to shop on the move. Interestingly enough, the latest retail sales data showed that the quantity of goods bought in the retail sector increased in the year to July by 3 percent, and the average weekly spend across the retail sector jumped to £7 billion from £6.7 billion in July 2012. So people in the UK are still shopping, but not on their high street.
So what is it that is putting people off? Could it be the proliferation of Westfield shopping centres? I know plenty of people who go to Westfield not to shop, but to go to the cinema or to eat. These giant centres, like the one in London’s Shepherd’s Bush, are part of the reason why surrounding high streets are failing to thrive.
Even in Chiswick, an up-market London suburb in easy distance of Westfield, the high street may be faring better than most, but that is most likely down to the cafes, restaurants and bars that keep popping up, along with the huge number of estate agents.
That leads me onto my two hypotheses’ about why the high street vacancy rate could stay elevated throughout this recovery and they have nothing to do with online shopping.
Firstly, the government’s policy to help boost home buyers and guarantee deposits is expected to fuel a housing boom. A housing boom breeds estate agents, particularly in the larger city centres and more affluent suburbs. The problem with estate agents is that they push up the price of shop rents and they don’t encourage footfall. If you are going to look at houses you are unlikely to go shopping for clothes or shoes, the most you might do is stop off for a coffee. This can leave independent retailers surrounded by estate agents struggling.
My second hypothesis is the lack of real wage growth in the UK (wages adjusted for inflation), is also having a big impact on the high street. If people feel poorer then they may try to save the pennies by not going to the high street and succumbing to temptation. Online shopping, in contrast, is far more surreptitious, which allows you to get that shopping fix without the guilt… Hence, overall retail volumes have been sustained, but our high streets are shadows of their former selves.
Of course, this theory of mine does not have any empirical evidence to back it up, but it makes sense to me.
If we are to see a pick-up in shopping in our high streets we need to see a decrease in the number of estate agents and an increase in our wages, without this Mr Osborne may have been a tad too complacent about our miraculous economic recovery.