Retail, Recession and Recovery: A Look at the Impact of the Recession on the Retail Industry and the Steps Towards Recovery
The recession has dominated the headlines for years now - hitting the UK hard in the home and on the high street. As we tightened our belts, more and more shops and retail units closed down and were boarded up. Today, the country seems to have avoided a triple-dip recession, and recently, encouraging signs have even begun to show.
High street hit hard
The recession affected Britain's retailers significantly. Using assumptions of what the country would look like outside recession, recent figures suggest that the overall cost of the downturn amounts to a huge £23 billion. The data factors in information on overall spending, including household disposable income, credit, population and demographic behaviour.
Since 2008, when the Lehman Brothers bank collapsed, heralding the start of the worst of the downturn in the UK, dozens of famous retail names have disappeared from the high street. The list includes Woolworths, Blockbusters, Borders, C&A, Zavvi and most recently Comet. HMV nearly joined the list in late 2012 but, after a flurry of store closures, managed to avoid complete dissolution.
Additional factors, like terrible summer weather, extreme winter snowfall and the on-going instability of the Eurozone exacerbated problems further for the UK's retail sector.
Slow trade and low confidence kept the UK's retail industry in treacherous waters for four years, but in late 2012 into 2013, green shoots tentatively began to emerge - as retail sales began to rise.
Many observers dismissed the positive signs as an effect of an upbeat year - including the Jubilee and a phenomenally successful Olympic games - which raised the profile of the country and kick-started spending. But the trend continued, by March of 2013 , withstanding hits like the horsemeat scandal, retail sales had reached a 3-year high - up 2.7% on the previous year.
The surge is being fuelled by a demand for electronic goods, especially smart-phones and tablet computers, but furniture and groceries are keeping pace. The Chancellor's recent budget, which cut fuel and beer duty and raised the tax-free income threshold, seems to have had its intended effect: increasing disposable income and encouraging household spending.
The online retail industry has also been performing well, with online business sales rising by 10% in 2013. Yet recent discussions of an 'online sales tax' have triggered unrest: retailers warn that any imposed tax would be a barrier to entrepreneurship, reduce choice and negatively impact small businesses - ultimately affecting jobs and spending.
With this in mind, Economists are quick to point out that the recovery remains gradual and fragile - and focus should stay on restoring confidence to ensure a lasting revival. Supermarket giant Tesco posted a drop in overall sales in mid 2013, citing issues like the horsemeat scandal and sluggish consumer spending as lead causes. Given the risk of slipping back into recession, many retailers are emphasising a 'slowly-but-surely' approach: recent research showed that customers were reacting to the positive signs - with mood for the on-going recovery improving fractionally.
Given the tightrope on which the UK's economy is balanced, the slow route to recovery seems to be the only choice. Many retailers are preparing for several more years of tough sales figures and are treating a 'flat-line' in their sales figures as a positive result.
How did the recession affect your high street? What signs have you seen that the retail industry is beginning to recover?