The British High Street Crisis Is Due to Debt, Not Brexit

Wage stagnation and austerity have left consumers too poor and indebted to allow stores to generate profits.

By Grace Blakely and cross-posted from New Statesman.

In 2018, the British high street endured its worst Christmas since the global financial crisis of 2008. Figures released by KPMG, which audits many of the firms in the survey, show that December retail sales fell by 0.7 per cent on the previous year. This follows a dismal 2018 for the high street, a year when shops on Britain’s top 500 high streets were closing at a rate of 14 per day.

Much of this reflects greater competition from online retailers. Many consumers have abandoned the high street in favour of websites such as Amazon. But sales for online retailers fell below expectations too. ASOS’s sales for the Christmas period were significantly lower than anticipated, prompting a fall in its share price of nearly 40 per cent.

Brexit provides an easy scapegoat for the high street’s poor performance. According to this view, uncertainty over the future of the UK’s relationship with the EU is encouraging consumers to delay purchases until later in the year.

It is true that many consumers seem to be displaying this thinking over the purchase of major assets such as housing. House prices have stagnated, and even started to fall in some places, as people put off purchasing until after Brexit.

But this is because people think very differently about asset purchases as compared to current spending. Purchasing a house is a financial investment so consumers make decisions based on their expectations about its future value, rather than simply the happiness they derive from consuming it now. House prices are likely to fall post-Brexit, so people have stopped buying.

Christmas presents are an entirely different matter. No one treats buying socks, jumpers and books like they do houses. People have to buy Christmas presents, and they’ll buy as many as they think they need, subject to what they can afford. This is the crux of the problem facing British high streets: British consumers are too poor and indebted to provide the kind of revenues that they need to turn a profit

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