Comment: Recession should drive overseas growth

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From recession to secession is more than just a direct alphabetical sequence.

It’s a real causal shift in these troubled economic times. Arguments that Greece should secede from the European Union – or even that the EU itself should decease – arise from austere recessionary conditions. But these are affecting all member states.

Last week’s historic agreement to hold a referendum on Scottish independence echoes the clamour by the Catalans and Flemish to unfetter their national bonds. Their respective Convergència i Unió and Nieuw-Vlaamse Alliantie parties have never known such fervent popularity and this comes from their supporters’ conviction that regional prosperity is being suppressed by national fiscal and budgetary policies.

But does secession make sense in the longer term? This is a question for politicians and electorates but, by extension, it’s also a real issue for retailers. Is this the time for retrenchment to core markets and activities or does the old argument to gear up in a downturn still hold true?

Analysis just published by PwC and the Local Data Company shows a net closure of 953 shops in the UK in the first six months of 2012. In Scotland and Wales the numbers were just 16 and 18 respectively. Not, on the face of it, the strongest argument for the devolution of England, where closures in the Southeast, West Midlands, South West and North West were all in triple digits.

These numbers of course include the high-profile casualties that have collapsed into administration. And they won’t be the last. They also reflect the rationalisation of store estates that is the inevitable corollary of the growth of online shopping.

But this is not a one-way street and the value retail sector, led by B&M Stores, Poundland and TJ Morris (Home Bargains) together with 99p Stores, Poundstretcher, Poundworld and Wilkinson, is growing at a dynamic rate. They have more than 2,000 UK stores between them and many are pursuing opening programmes of at least one store per week. Limited assortment discounters are following suit: Aldi will have 500 UK stores by the end of the year and foresees doubling its estate in the next decade.

Aldi’s international scale (in 18 countries) has been established in good economic times and bad, and although the latter may favour its format it’s not because Aldi’s a discounter per se that explains its global success. Other European retailers, not least in fashion, have achieved at least equal cross-border success.

International expansion should be the offspring of recession not its victim. Marks & Spencer has certainly learned that lesson. Even if the Flemish, Catalan or Scottish secessionists succeed, their retailers won’t dream of seceding with them: M&Co has spent 50 years building a pan-British business beyond its Scottish homeland and it now trades in the Middle East with other international franchises in the offing. Mango, a great Catalan success story, is now present in 91 countries. Were Catalonia to split from Spain, this would simply make it 92. Viva el mundo!