Murray Asset Management – Investment Management Team
The most recent data from the Office for National Statistics shows the unemployment in the UK continues to hit new lows – only 3.8% of the workforce is, we are to understand, without a job.
Why, then, is the story from the high street so markedly different? Thanks to comparisons with the period when the Beast from the East kept shoppers away, the month of March saw a sharp year-on-year rise in retail sales; but the underlying picture is less rosy, with 23,000 stores expected to close during the course of 2019. The high-profile collapse of Debenhams has been accompanied by a litany of other retailers announcing that they are calling in administrators – fashion chains like Pretty Green and LK Bennett, the bathroom suite distributor Better Bathrooms and Patisserie Valerie are all on the list of failures in the first quarter.
Nor is the blame entirely to be laid at the door of the online onslaught. Online retailers Wine Direct and Miss Shoes also suspended trading, the latter citing intense competition among their reasons for failure.
There is certainly a fierce battle for the attention of the UK consumer, but one would have thought that with so many in work, there should be enough retail spend to go around. The devil, though, is in some of the detail of the unemployment data. The growth in zero-hours contracts means that a worker can be regarded as employed, while still failing to secure any earnings; and the result of that has been a fall in productivity and consumer confidence.
The challenge, therefore, is to overlay on the rosy employment picture a realistic assessment of the shopper’s wallet, and both high street and online retailers must work hard to retain a share of that slim purse.