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A depressing end to 2019

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As the old saying has it, “the media wants to tell you a story, not the story.”  And the economic story they want you to believe is that there is nothing wrong, it is just that lots of people are shopping on Amazon, lots of other people are worried about Brexit, and that the government really has to do something about Britain’s antiquated local tax system.  How else, after all, are we to explain the fact that we lost a staggering 2,750 retail jobs a week in 2019?

“This is the highest rate of job cuts in 25 years on high-traffic shopping areas, called ‘high streets’, and marks a rise of more than 20% year-over-year, compared to the 117,400 jobs that were shed in 2018…

“Store closures also increased. This year, 16,073 UK shops (about 61 per day) were shuttered, up from 14,583 total closures the previous year. About 38,100 jobs were lost due to stores going bust, including Karen Millen and Coast, but the majority of job cuts (roughly 78,600) occurred as retailers made adjustments to cut costs, according to British media reports.”

The much hoped for Black Friday/Christmas spending spree also failed to ride to the rescue.  As the BBC reports:

“Retail sales fell for the first time in 25 years last year, according to the leading UK retail industry body.  The British Retail Consortium (BRC) said total sales fell 0.1%, marking the first annual sales decline since 1995…

“A separate report from Barclaycard found a rise in consumer confidence had failed to boost festive spending.  The payments firm, which processes nearly half of all UK debit and credit transactions, said that consumer spending growth had declined if inflation was taken into account.”

Both the BBC and Fibre2Fashion articles cite the latest Office for National Statistics data for online retail as the main explanation for the decline in High Street retail; noting that 21.5 percent of sales are now online.  Neglected from both articles – and from mainstream media coverage in general – is the fact that this percentage is lower than the 21.6 percent (of higher total sales) figure for 2018 – when, incidentally, uncertainty about Brexit was far greater.

This is not to suggest that online sales, business rates and Brexit do not have some part to play in Britain’s current economic woes.  Rather, it is to point out that these are themselves merely the consequences of a far deeper structural collapse.  The real story is that Margaret Thatcher, Tony Blair and Call Me Dave lied to the British people when they told us that industry and manufacturing are unimportant and that a “knowledge-based” service economy backed by mountains of debt-based currency can provide prosperity for all.  The reality is that Britain has become an 80:20 economy in which a small – and shrinking – affluent class continues to enjoy rising living standards similar to those prior to the 2008 crash; while the overwhelming majority have seen their living standards decline – with those at the bottom hit particularly hard – for more than a decade.

The obvious consequence of this is that people’s spending patterns have shifted.  Online retail benefits from this insofar as its lower overheads can be passed on in the form of price reductions; not least because pay and working conditions in the sector are particularly poor.  For households that are living from pay cheque to pay cheque, the price difference between physical and online retail is the difference between putting food on the table and going hungry.

The bigger shift in spending patterns, however, is to be found in the few retail sectors which continued to grow over the last decade.  Housing costs, energy and food retail have enjoyed continuous growth even as more frivolous purchases like foreign holidays, dining out, fashionable clothing, garden tools and equipment and even private motoring have all been hit hard.  This marks a big shift from discretionary to non-discretionary spending; as more and more households have less and less cash left over after they have paid for essentials.

There are limits to how long an economy can go on in this way – although we should be wary of mistaking inevitability for imminence – before the entire charade comes crashing down around us.  One way in which the next crash may manifest is in a pensions industry that is heavily invested in city and town centre commercial property.  The more shops are abandoned, the less rent finds its way back to the pension funds – and this is occurring just at the point that the baby boomer generation is entering retirement and anticipating huge final salary pension payments.

One indication that a crisis may be nearer than we might otherwise expect came in the unlikely crash in Christmas pudding sales:

“Figures from market research company Kantar suggest they may be, as sales of the traditional dessert fell by 16% in the UK in the run-up to Christmas.  There was also an 11% drop in sales of seasonal biscuits in supermarkets, while turkey sales were down by 1%.

The figures come as Morrisons said its sales fell over the Christmas period amid ‘challenging’ trading conditions. The UK’s fourth-largest supermarket group reported a 1.7% fall in like-for-like sales – which strip out the impact of new stores – excluding fuel, for the 22 weeks to 5 January.

There was some hope that the other supermarkets might have fared better and that Morrisons’ loss merely signalled a switch to discount stores such as Aldi and Lidl.  Initially this appeared to be true.  However, the apparent year on year percentage gains were only the result of new stores opening during 2019.  Once the figures had been adjusted for this, even the discounters had experienced no growth; while the other supermarkets were in decline.

The big concern with the latest food retail data is less to do with the fate of Christmas pudding manufacturing than the fact that these outlets have only remained profitable as a result of non-discretionary spending.  If the people who used to buy puddings, biscuits and turkeys can no longer afford to, then you can be sure that the people who ceased being able to afford such things years ago will be turning increasingly to the network of food banks to supplement already meagre diets.  And as the food retail sector begins to feel the pinch, the foodbanks themselves will become unsustainable.

There is a sick irony in the now obvious fact that the Tories – aided by the complicity of Blair’s New Labour – who are largely responsible for bringing about this state of affairs, have emerged as the political beneficiaries of it.  The Brexit result was delivered (in England and Wales) by the 80 percent who have seen their living standards plummet and their communities hollowed out by decades of neoliberalism.  The same 80 percent in the places we were told did not matter anymore changed the political geography of Britain for good last month.

Like Trump on the other side of the Atlantic, there is little long-term likelihood that Boris Johnson is going to “Make Britain Great Again.”  The twentieth century industrial and manufacturing jobs – underpinned by the UK’s massive store of coal, oil and gas – which supported a population of 60 million are gone for good.  The City of London money laundering scam is on the life support of quantitative easing and ever lower interest rates; and the North Sea oil that underpinned the last debt-based blow out is drying up fast. The best the Tories might manage is to print and funnel enough new currency into the northern and midland seats that gave them their majority to share some of the pain that awaits us and to inflate away at least some of the unrepayable debt.

Either way, a decade which is beginning with collapsing living standards for the majority of the population is not going to end well.

As you made it to the end…

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