By Chuka Umunna - 16th January 2013
We all remember heading out to the high street to buy our first album. Mine was MC Hammer’s third album (featuring his smash hit “U Can’t Touch This”) purchased from Our Price on Streatham High Road many years ago. But after the UK’s last major high street music retailer, HMV, went into administration yesterday, it could become a thing of the past. An institution on our high streets for over 90 years has now gone the way of Woolworths, Comet, Jessops and only this afternoon it has been reported that Blockbuster are going into administration. The hope is that a buyer can be found, not least for the sake of HMV’s 4,500 employees.
It is an understatement to say that this is a difficult time for the high street. In the last 12 months alone, more than 50 major retailers have gone into administration, with over 50,000 jobs affected. This is a tragedy for employees, but it is also of huge significance for our economy. Retail is our economy’s largest private sector employer, accounting for more than 3 million jobs – around one in ten. The sector offers opportunities to people at every stage in life and for many is their first experience of paid work - around 40% of 16 and 17 year olds in a job work in retail. And UK retail is among the most innovative conventional retail sectors in the world. CEOs from around the globe come to the UK to walk through our stores to learn and see new ideas in action.
Yet the conditions facing conventional UK retailers are challenging the ingenuity of the best. The Tory-led Government’s failed economic plan has undermined confidence, weakened consumer demand and made trading conditions extremely tough. This is not just a problem for retail: last week we saw manufacturing, production and construction figures down, showing just how fragile the economy is.
But for retailers, the current weakness of the economy is being compounded by more fundamental shifts. Multichannel shopping is becoming the norm in the UK much faster than elsewhere as British retailers have been in the vanguard of the online revolution. The UK is the third largest market for internet shopping in the world, with a greater share of goods bought online than in any other major market. From iTunes to Spotify, the way we are accessing music has changed beyond all recognition.
Change brings challenges for existing players in any sector - as we are seeing in retail - but it also brings opportunities. An important role government can play is to support this process of adaptation to new circumstances. Instead of turning a blind eye and shrugging their shoulders as household names on the high street go under, ministers should be doing all they can to assist in this evolution. In the short term it should act to boost demand with a temporary cut in VAT, a measure with wide support across retail. It should seek to create a more level playing field on taxation and rates applying to conventional stores and those applying to online sellers by, for example, ensuring that multinational retailers pay a fair share of tax.
Instead of sleep walking towards the exit door of Europe, the government should be engaging actively with our European partners to simplify rules and increase the size of market for British retail, not shouting from the sidelines. Increased access to markets will increase the chances of success for innovative retailers.
It should do more to protect the integrity of the market for music by taking more aggressive action against piracy. Almost £1bn worth of single tracks are downloaded illegally in the UK each year, with about a quarter of this estimated as being actual revenue lost to retailers. Here the Government must stop delaying full implementation of the Digital Economy Act and show leadership on tackling illegal sites.
It should be providing more active support for those losing their jobs in the retail sector, developing a skills system that can train workers with the skills and competences – like sales skills - needed to take full advantage of multichannel shopping in the future. It should be harnessing the strengths of small and large retailers in their shared interest, just as many department stores now recreate the feel of a local market with a variety of concessions within the store.
And Government should back our call for a Small Business Saturday, replicating an idea that has worked successfully in the US, championing small businesses and promoting shopping on the high street in the run up to Christmas.
The British people don’t want a Government twiddling its thumbs while retailers go to the wall. Instead people want an active government implementing a proper strategy to back one of our most important sectors before it is too late.