The woes of Arcadia and Debenhams hit the headlines – with inevitable job losses in Cambridge

Was there anything local organisations could do, or was this another failure of corporate governance and of government policy?

Sometimes I get the impression that Boris Johnson’s ministerial team is in office but not in power – an epithet thrown at John Major’s Government in the early 1990s by his Chancellor Norman Lamont who resigned following the Exchange Rate Mechanism debacle. (In the year 2000 The latter received this controversial medal). Fast forward to today and the policy editor for BBC Newsnight posted this:

Crises in government never happen one-by-one – they come in groups. Two of the three headlines refer to the perilous state of high street retail in the Cambridge Independent.

Cambridge, historically one of the county centres for retail, has one of each of the brands listed. That means the potential closure of ***seven*** shops, Debenhams and Topshop/TopMan being the largest of them. Not good news in a struggling economy in the run up to Christmas, and even worse in the middle of a pandemic. Normally it is in January that creditors pull the plug on struggling retailers. It is the time when they have the most cash in the bank following the Christmas peak and January sales, and when they have the lowest stock levels. Can the Arcadia stores keep going until the new year? Will shoppers keep away?

Depressingly, in the course of writing this, the news of Debenhams going into liquidation has just been released. This was supposed to be one of the anchor stores of The Grafton Centre. It will leave a massive void behind.

State of the ‘high street’

Cambridge hasn’t been great, which means it’s been even worse elsewhere. And that was before the pandemic. This article by the BBC”s Emma Simpson is from October 2019 – just before the General Election 2019. The High Street has been a public policy issue for quite some time.

“But the overall picture is the UK has too many shops, they’re too big and in the wrong locations.” Emma Simpson – BBC News Oct 2019.

The Cambridge News periodically reports on the state of retail in the centre of Cambridge. In 2018 they looked at the number of empty shop units. A similar article in 2019 followed, with the inevitable survey asking readers what list of chain stores they wanted.

High street brands loaded with debt

This was highlighted in an article by the BBC in 2018. The website This Is Money listed a number of firms in the same year that they had concerns about – some of them such as Mothercare inevitably going under, including the store in The Grafton Centre. No retailer was willing to take up what is one of the larger retail units, so it was turned into a table tennis venue until the Pandemic resulted in its closure.

But it’s the huge debt that high street brands have had loaded onto them that has disturbed me. The case of Pizza Express is one that again resulted in the closure of one of its Cambridge restaurants. Such was the scale of the debt that any operating profits were wiped out by the interest payments.

How did such brand names end up with such huge debt? The Leveraged Buy Out model – the one that resulted in the controversial take over of Manchester United Football Club. Essentially the consortium doing the taking over raise funds from banks and hedge funds which get paid off (or all too often, only serviced), with future revenue with the existing assets used as security. In the case of Pizza express, the revenues ended up being far lower than the interest payments even though the profits before the interest payments seemed reasonable at first glance.

The model left “A trail of destruction on the high street” – this article mentioning the decline of the owners of the old Cafe Rouge & Bella Italia restaurant chains that resulted in the closures of restaurants in Cambridge – with the inevitable job losses.

So many job losses are not without consequence – so why have ministers dragged their feet?

One of the reasons is political ideology – ministers simply don’t see it as the role of the state to intervene in ‘the market’. But then even if they did, the current cohort of ministers is hardly one brimming full of high calibre politicians of cabinet ministerial material. (I have Treasury Qs on in the background – reminded that one of the ministers at the despatch box is the author of David Cameron’s failed Big Society policy – with the minister’s wife becoming embroiled in the cronyism scandal on Covid19 contracts.

The roots of the problems pre-Covid19

The House of Commons Committee on Housing, Communities and Local Government published a report in early 2019 on the state of high streets. The headline recommendation refers directly to the switch to online shopping.

“High street retailers are paying more than their fair share of tax, while online retailers are not contributing enough. We heard that Amazon UK’s business rates amounted to approximately 0.7% of their UK turnover,1 while high street retailers are paying considerably more, with business rates as a proportion of turnover ranging from 1.5% to 6.5%.

House of Commons HCLG Select Committee – High Streets & Town Centres in 2030

The report also included recommendations for local councils, businesses, and landlords. But until central government is able to take on the multinational tech firms and online retailers, (something that ideally the UK would be doing within the EU, but hey, Brexit), and until central government removes the restrictions on local government regarding raising revenue independent of Whitehall, it is difficult to see where the much-needed changes are going to come from.

“What happens to all of the empty shop units in Cambridge then?”

Hard to say for now. We’re still under lockdown today, and although we move into a new system of tiers it still looks like a very long time before the restrictions can be lifted. The longer any of the restrictions remain, the harder it will be for any of the high street businesses to survive – simply because the restrictions inevitably mean a lower footfall in the face of a population having been hit with successive waves of job losses.

Bear in mind that we’ve still got the climate crisis – with the Arctic sea ice not forming even though it is now in permanent darkness due to the Arctic Winter. And then Brexit – with. the countryside being covered in concrete because of the failures of ministers to negotiate with the EU.

We cannot go back to a high volume, high turnover retail model for our town centres

The planet simply cannot sustain it. We’ve known that for years – recall the headlines and horrific photographs on the plastic crisis. See the Natural History Museum’s take from 2017 here. I went off on one when the Cambridge News asked when things were going to get back to normal.

“So what is better than normal?”

This is one of the reasons why I’ve been going through the old Penguin Specials at a rate of knots. In the run up to WWII, Penguin the publishing company started producing lots of cheap books on contemporary issues by some very high profile writers. The longer the war went on, the more radical the political ideas became as it became clear the war would involve more than sending an expeditionary force over to France to help sort things out. It wasn’t until Churchill formed a Coalition Government with Labour that the resources of the nation were committed. We are only nine months into this pandemic. It still has a very long way to run – far longer than ministers are letting on.

As I mentioned in this blogpost, the scale, intensity, and length of the crisis that the world wars entailed – including the social upheavals, resulted in extensive collective conversations the like of which nations rarely have – even in general elections. These days such campaigns are sterile stage managed operations and life still carries on as normal. In wartime, life isn’t normal. In a pandemic, life isn’t normal – as we have found out. The future of our high streets and town centres need to be incorporated into the conversations that are starting across the country on what a post-Covid19 society could be like. Has your council started those conversations? Because with the number of firms and employers closing permanently, the world that we emerge into will not be the same one that was locked down back in March 2020.

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