Could accountants get the retail blues?

Toys "R" Us
Toys "R" Us
The Imprudent Accountant
An unnamed firm
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As if the weather wasn’t bad enough over the last few days, the news has been filled with doom and gloom regarding some of our best-known retailers.

The media seems determined to ensure that companies on the brink do not survive. Having put the boot into Maplin’s and Toys “R” Us, both of which departed this world (or this country anyway) on the same day, they immediately nominated a couple more candidates for imminent disaster.

Quite how Prezzo and New Look are supposed to survive after receiving the kiss of death on the BBC is beyond me. This kind of speculation about the failures of long-established brand names seems to have little to commend it. At the same time, House of Fraser and Debenhams both came into the frame and may now find themselves hounded out of existence, although Sports Direct which holds a stake in both businesses might not wish to allow the latter to go under.

To my eyes, one of the saddest and most pessimistic aspects of this story derives from the wide range of offerings these high street staples provided.

We have (had) an electrical goods retailer, a toy shop, a restaurant chain and a clothes shop in the dead or dying category and two chain stores at the intensive care level. This suggests that the problems are deep-seated and possibly endemic, spreading across the whole of the shop-based retail sector.

We are all responsible to a degree, on the basis that I doubt any reader shops exclusively on the high street these days, preferring the comfort of ordering online. It hadn’t really occurred to me before but every time I buy something from Amazon, I am potentially harming some competitor with much higher costs.

Some of those might well fall into the tax category as well, since purchases on Oxford Street will be subject to VAT, while Amazon is still in avoidance mode, additionally ignoring their fair share of corporation tax and employment taxes, probably accounted for in the Channel Islands rather than here.

Each of the struggling companies named here appears to have failed due to an inability to adapt to economic and social change. Effectively, these companies were living in the past and therefore could not survive. What worries me is the extension of this logic to our own industry. Unless I’m missing something, many accountants very happily bury their heads in the sand and continue operating on pretty much the same basis that they have for decades.

Does any of this matter to the world at large? It certainly does to those thousands of employees who will not be working in the coming weeks. The timing couldn’t be worse as they will presumably be struggling to pay their heating bills as well.

More widely, if a series of well-known chains disappear down the plug hole, this will have ramifications across the country. Some of their suppliers might begin to struggle, while those providing services eg accountants could find clients going into administration or liquidation or, just as bad for us, unable to afford our fees and feeling the need to go to cheaper rivals.

The next couple of years could be very tough for the retail sector and the knock-on effect could damage the economy both in a local sense and nationally. In the overall scheme of things, a few inefficient companies going into liquidation may make very little difference to any of us unless we have friends or relations hit directly.

However, if this is the start of a recession, with house prices falling, businesses beginning to struggle and the uncertainty of the European exit leading others to disappear offshore and adding to the general depression, I’m beginning to wonder whether being a Brit will be much fun in the early 2020s.

About The Imprudent Accountant

About The Imprudent Accountant

Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.


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06th Mar 2018 15:15

Even at local level up here there is talk of certain retailers and food chains ( I will not name them for fear of blighting their prospects) of late trying to do deals (threatening insolvency if not agreed) with landlords re rents, whilst such softening will not directly impact my employers (we do not rent out that sort of property) any high street rent softening will cascade down into the secondary/tertiary arena where we do operate. (albeit we do not have that much retail space) In food even non nationals are feeling the pinch, those carry outs not embracing delivery suffering.

This issue is not just retail, office space could over next few decades see a slackening demand if AI increases and head count reduces, we are already seeing former Edinburgh offices (especially New Town) going back into the housing stock, I can see this continuing.

We have already internally earmarked which of our properties might readily become residential, which will likely get demolished for residential and which will likely stay as they are into the future, these sorts of changes are likely going to continue to impact city centres for quite a time to come.

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06th Mar 2018 18:33

I find it ironic that in the week these long established businesses went to the wall with on line trading listed as the main course with likes of Amazon, eBay the main culprits whose operation came to a standstill because of 6 inches of snow that they were not able to deliver any products.

In Newcastle I have noticed a big trend in repurposing office space into serviced offices/incubator hubs on easy on easy out basis. They all fill very rapidly with occupancy of 90%+ achieved. Their is also a lot of residential going back into city centre, new that student lets seem to have peaked, there seems to be a fresh approach to building city centre apartments.

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07th Mar 2018 15:17

Longer term we are in the middle of a huge retail transition from trudging round the shops at a weekend,to buying stuff online. The highstreet has huge overcapacity issues now.

This has far from worked itself through yet in terms of high street rents and business rates, but in 20 years time I would expect to see much small retail space in place in city centres, in a much small footprint, concentrated almost exclusively on clothing, restaurants and leisure. Out of town stores are dying a slow death too. Why get in your car and drive to B&Q and poke about for 30 minutes when you can buy cheaper and better quality products from Screwfix [same owners] and either get it delivered, or pick it up from the counter.

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07th Mar 2018 17:25

I am not necessarily in agreement with the idea that the high street is dying with online taking over. There is no doubt that there will be changes but specialist shops are springing up as quickly as the larger ones are dying. This has been going on for a long time. Alders was one casualty.

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to pauljohnston
08th Mar 2018 14:40

There will always be winners and losers in the retail market. Maplin is a specialist niche store but this has struggled just as much as the larger stores. I suspect because it wasn't "techie" enough for the real geeks and too "techie" for the casual shoppers.

Woolworths was another big casualty a few years ago, but they were overcharging in a lot of their product areas, especially CDs/DVDs. Interestingly, Wilko seem to have positioned themselves into the space vacated by Woolworths.

I personally would not be too surprised to see W H Smith in trouble soon as I'm not entirely sure what they offer these days that you can't get online or in other stores.

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