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