• Mark

The Earth has turned - New era replaces all

Now that we managed to weather the pandemic it is worth noting its impact on our economy and indeed the way we will conduct our lives thereafter. That last part will be covered by Professor Sam Whimster.

It occurred to me that all global calamities (until now world wars) wreak havoc on one side but also affect pace and quality of progress on the other.

In case of the UK, it more-or-less enforced a profound macro-economic shift, which I will try to prove.


The existential threat to Retail has a been in place pre-pandemic, growing steadily and within the industry.

They can’t say they didn’t see it coming. Covid just made sure its demise.

Not only that, its impact ‘dominoed’ onto the world of property, and it turn finance.

Retail is a key industry in the key sector of our economy – the Service Sector.

Falling store sales, coupled with high debt, and always inadequate online presence were pushing ever growing raft of key retailers toward true - or at least ‘arranged’ - bankruptcies pre-pandemic, but COVID dealt the final blow. Ironically it hit the supposed big beasts of the industry the hardest.


This list shows just the more recognised brands hitting the deck. This includes full demises, voluntary arrangements, and buyouts for ‘penny in the pound’ to keep the brand online, which in turn assured pureplay retailers even more power.

Dramatis personae:

The supposed guru of it all, Philip Green, hasn’t even mastered a smartphone, much less understood its power, and his ‘new-tech’ shtick was to establish the new tech team and then withdraw the allocated funds once advisors and investors were off the scent. To bring down TopShop – a Europe-wide mecca of cool took some doing. Instead of getting is house in order and following his core audience into their virtual universe, he quietly leveraged the brand value to the point of losing effective control but still wouldn’t see merit in modernising.

House of Fraser occupied space just under luxury but above everyone else. It changed hands for years. Finally fell into Chinese hands. It worked for a while but then in 2014 Nanjing Xinjiekou Department Store Co bought 89% stake in Highland Group Holdings Ltd, which owned the business for £450 million. Sanpower Group was a 22 % shareholder of the Nanjing Xinjiekou Department Store Co. They also brought ignorance of product knowledge to the party in the era of fickle, forever changing fashion tastes. In May 2018, the group entered a voluntary arrangement and in June the closure of 31 stores was announced.

Overall retailers paid 15% of due rents by end of March 2021 quarter. 16,300 shops shut in 2020.

Of course, nature abhors vacuum – and new funky players will appear. But none will be of size and durability of the former core tenants, and none will fil the vacuum straight away.


The US has been hit the hardest – 30% of malls are permanently closed (less than 1,000 remain) and social impact over there is more profound than here. Lot of them were cultural centres – shall we say.

The reason I mention this is that my decades’ long retail experience suggests that whatever happens there invariably happens here but later-on.

At the same time online was rising and rising.

More profoundly:

· “75% of people buy online.” This in face of rates below 30’s before

· ‘Second lockdown witnesses only 14% rent of £2.5bn due being paid by retailers”.

The crown jewels of the retail property are shopping centres. And inside it, anchor tenants make the system viable. Smaller players take space at premium rents as anchors generate substantial footfall.

INTU properties, which were voracious in consolidating that market already beginning to wane. It collapsed into administration having exhausted the debt route and creditors refused to play ball. Debts £4.5 bn.


Shopping centres in peril


Generally, in the commercial property sector £ 8bn of loans were in degfault. Double on the previous year.

Property market always has boom-bust cycles, sometimes they are prepared, sometimes not. One of the wisdoms was that retail and office side could leverage each other. On this occasion they both collapsed.

Analysts agreed that one bright spark might be retail parks (but not OFFICE PARKS), especially those adjacent to out of town hypermarkets.

THE GOOD ONE: British Land bets on Retail Parks. They sold office properties and plough the proceeds into retail parks to the tune of £1.2bn.

THE BAD ONE: Hammerson went the other way selling its retail parks to Canadians to protect Bullring and Cabot Circus – which they won’t. £ 300m smacks of fire sale of course. Their recorded loss was £ 1.8bn. Their property portfolio value of 2.2bn.

FINANCE. The City is on the hook in all of it. Astonishingly, they carried lending even in face of online revolution pre-covid.

Most shopping centres are developed with huge element of outside (City) finance. They thought they got the golden fleece but then Hercules appeared. Book values on the floor and no solution in sight.

All this slightly up-ends City plan 2036. Three skyscrapers coming up, many more getting permits. That’s a 10,000 capacity for the three alone. At this time however the minimum estimated amount of workers shifting to work at home is put at 120,000 – although I feel overstated. Reported vacancies stand at 16.3% already.


Service sector share of GDP exceeded 80% pre-covid as the transformation kicked off by Baroness Thatcher in the early 80’s has now reached its Zenith.

As things stand, our widely recognised flagship industry – the City - contributes a staggering 6.9%

The wrecking ball of growing online economy was visible every single day.

Faced with it the leaders of the service industry distinguished themselves by the sheer incompetence, ignorance, or helplessness. More humorously, their financiers were not much better.

The impact of this is much more wide-ranging than retail demise and trouble for its supply chain.

Online activity has encompassed almost all walks of life from controlling your thermostats when away, to healthcare, household security, to the joy or menace of Siri and her ilk. Blockchain is a good world trading example too. Even such conservative sectors as agriculture succumbed. Industrial applications – from robotics to back office - proliferated. Even that paragon of stately pace – the government - now demands we talk to it virtually.

On the supply side, the online development progress was assured by the currently termed tech sector. Its growth is more akin to eruption than just progress. The Office of National Statistics (ONS) states that there were 19,465 new tech start-ups registered in the 'information and communication' sector in 2020. Of course, as is the nature of these many will fail but the scale gives a clear guide to the situation.

The only dampener on this shift becoming universal has been slow uptake of existence/participation by over 50’s.

This is where Covid stepped in – enforcing that final step.

All age groups and all businesses are in.

This move enabled the industrial revival to reach boiling point. Industrial output in April was the highest for 27 years!

Industry is taking full advantage. Function after function becomes ‘virtual’ freeing costs and resources to concentrate of growing production and enabling innovation. You can prove that pureplay activity has little or no characteristic of traditional service economy. For one thing they do not employ skill-les floor walkers but database experts, forecasters, CGI experts, etc.

Osborne’s Northern Economic Miracle is a fact. Textile industry reviving, core manufacturing also. Wisely they stay away from building unsellable ships but assimilate opportunities from high tech progress where the UK is at least a co-global leader.

On top of that AI, soon Quantum, are coming and this creates even more non-services progress.

The recent announcement that we will soon be processing our own rare earths tells it all. Defence sector is once more at the cutting edge of progress. Now we won’t be forced to defend ourselves with barrage of lattes.

One look at top vacances tell sit all:

Demand for tech savvy personnel from industry is insatiable. March 2021 (ONS).

Electrical and electronic engineers, Civil engineers, Design and development engineers, Tech support professionals. Software developers

The further breakthroughs will arise. Autonomous transportation, virtual cities, autonomous military. 3 D printing of everyday necessities at your home next to come. Technological progress is a given.

Soon we’ll be back where we were in at the peak of the first industrial revolution.

The new era has arrived. Covid be thank

2 views0 comments

Recent Posts

See All