The Collapse of the high street and its wider economic and business implications. Image:Colchester high street showing tough times with stores closing at a rapid rate.
The warning signs of a crumbling economy in Britain can be seen as far back as 2007, with New Century Financial specialising in sub prime mortgages filed for Chapter 11 bankruptcy protection. With the banks being sold many of NCF’s debts, so began the collapse of the sub prime mortgage market. The impact of this collapse was soon felt by banks on a global scale. Later in July Investment bank: Bear Stearns tells its investors they will not receive any money due to rival banks not providing a bailout.
In Britain Northern Rock were amongst the first to feel the media coverage of what was revealed as just the beginning of an economic decline, Little did the public know just how deep we were about to go into decline. Fast forward one year later and Britain is on the brink of a recession House prices have fallen by 10.5% and Chancellor Alistair Darling warns that Britain is facing its worst crisis in 60 years.
In the US the government bailed out Fannie Mae and Freddie Mac accounting for almost half of the outstanding mortgages in the USA, it was seen as one of the biggest bailouts in history. This side of the pond in the UK, Lloyds TSB announced that it will take over HBOS one of the UKs biggest mortgage lenders.
Jump to today and Britain's economy has avoided a triple dip recession. "The Office for National statistics said its preliminary estimates for gross domestic product (GDP), showed the economy grew by 0.3% in the first three months of the year." (1) However our minds are still fresh from the UKs embarrassing blow earlier in the year, by losing its AAA credit rating, from one of the worlds leading credit rating agencies Moody's. Now at AA1 this is the first time in Britain's economic history that it has had a less than perfect rating. This came as an even bigger blow for Chancellor, George Osborne, who promised that Britain would not face a downgrade in credit rating.
The economic problem as we all know now , is not specific to the UK and its effects can be seen across Europe and North America. Already there have been bailouts for Greece ($145 billion) and ($110 billion) to Ireland. Cyprus is also in a heavy crisis.
Step away from the banks and the bigger picture starts to reveal itself elsewhere: The high street. What was once a bustling selling ground and has now become a desolate graveyard, with big high street names disappearing in what seems over night. It became apparent there was a problem when iconic retail chain Woolworths went into administration on November 26th 2008 resulting in 27,000 job losses. A clear message was sent to the rest of the high street, that even the biggest stores were able to fail. It was a message too late, the wheels had been set in motion and one by one other retailers had to bite the bullet and enter administration. In 2013 alone: Jessops, HMV, Blockbuster, La Senza and Republic were just a few of the big names to enter administration and who could forget Britain's second-largest electrical retailer Comet. Going into administration in 2012, Comet had to close 243 stores and lose 6,500 employees when it ceased trading.
Is the high street dying or is it that the high street needs to evolve, to adjust to the changing needs and expectations of the consumer?
Jon Copestake, retail analyst at the Economist Intelligence Unit, said: “A theme is beginning to emerge on the high street as sellers of obsolete products using outmoded channels and inflexible business models see their creditors waiting until after Christmas to call in debts.(2)
The administration of Game; to name one of many, is a true testament to a market lagging behind consumers expectations and needs of the market. With the acquisition of Gamestation in 2007 costing £74 million, why were no alarm bells ringing? Physical purchases of...
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