Austerity engulfs the high street

Thorntons joins growing list of casualties in a week of retail misery that could cost 10,000 jobs More than 10,000 retail jobs face the axe as the British high street faces one of its most painful bouts of contraction since the second world war amid the biggest squeeze on household budgets for decades. As the government’s austerity measures take hold, experts warned that the number of retailers going bust would continue to rise this year with a number of household names facing insolvency. The confectioner Thorntons emerged as the latest high street casualty when it said on Tuesday it would close up to 180 stores, putting more than 1,000 jobs at risk. The flooring chain Carpetright followed suit, saying 50 stores could close as consumers shun purchases amid fuel and food price inflation and rising job insecurity, especially in the public sector. Over the last week, a clutch of high street names announced they were in trouble. Habitat was among several to call in the administrators, putting 750 jobs on the line. The electronics retailer Comet is also shutting stores. The department store chain TJ Hughes said it was planning to appoint an administrator after a slump in sales, raising a question mark over the future of 4,000 employees who work at its 58 stores in England and Wales. The retail carnage will intensify the debate around the coalition’s spending cuts and, on Thursday, 750,000 teachers and civil servants hold a one-day strike to protest at reforms to pay and pensions which they claim will leave them worse off despite having to pay more to into their retirement plans. In parliament, Labour is lobbying for a cut in VAT payments to bring relief to consumers and cushion shops from spiralling rent bills. Underlining the difficulties, final figures on growth in the first quarter of this year released on Tuesday showed it remained at 0.5%. With growth in the last quarter of 2010 at -0.5%, this means zero growth between the end of September last year and the beginning of April. Data also showed households ate into savings to make up for a squeeze on incomes. The Bank of England governor, Sir Mervyn King, told the Treasury select committee: “I am definitely concerned by … the squeeze on real income. This is the way in which we as a country are adjusting to the consequences of a crisis, and the macro economic rebalancing that is necessary to get through that.” There was some better news for workers when the administrator to the women’s fashion chain Jane Norman sold 33 of the company’s stores to Edinburgh Woollen Mill, saving hundreds of jobs. However, more than 1,000 staff at other shops face redundancy adding to a toll that includes nearly 3,000 staff and related employees at Homeform, which controls Moben Kitchens, Sharps Bedrooms and Dolphin Bathrooms, and which called in administrators last week. Several thousand jobs are also going at Focus DIY. Maureen Hinton, senior retail analyst at Verdict Research, said: “It feels every bit as bad as at the height of the credit crunch when Woolworths collapsed. We are going through a retrenchment that is probably as severe as we have seen since the war.” Supply was outstripping demand, she said, and weak operators were at a high risk of going to the wall. “If you are not covering your costs and you are subject to upward-only rent reviews on leased properties, you are in dire straits,” she said. Analysts said the British retail sector was at “saturation point” and companies were able to make money only by poaching custom from rivals as the underlying market was not growing. Other operators viewed as vulnerable were specialists selling stationery or kitchenware, or those who confined themselves to footwear or other products when general retailers were diversifying. Hinton said: “Even the supermarkets can see there are limits to how much they can expand in Britain, which is why they are looking to open businesses abroad.” Mike Jervis, a restructuring expert at PricewaterhouseCoopers, said that firms with mediocre management or who bought the wrong stock at the wrong time of the year “are probably toast”. He added: “I think the sector is going to have a very rough time over the next six months.” Carpetright, Britain’s biggest floor coverings retailer, said it expected tough trading conditions to continue over the next two years as it posted a 40% fall in profits and axed the final dividend. “Looking forward, over the next two years we expect the consumer environment to remain difficult and have adapted our plans accordingly,” said its chairman, Philip Harris. Carpetright, which trades from about 700 stores in Britain, Ireland, Belgium and the Netherlands, has suffered from fragile consumer confidence. Julie Palmer, partner at Begbies Traynor, said the struggles of discount chains like TJ Hughes indicate that no retailer was immune to the problems facing the high street. She said: “The discount end of the retail market was previously thought to be recession-proof but now it is starting to show cracks as consumers cut down on even life’s little luxuries to pay for necessities like food.” Kevin Green, chief executive at the recruitment and employment confederation, said the “feelgood factor in April and early May caused by the royal wedding and the bank holidays that gave retail a much-needed boost has now evaporated.” Retail industry Recession Thorntons Economics Consumer spending Richard Wachman guardian.co.uk

Posted by on June 28, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.