Retail’s week of woe could be just the start

In bad times, weak retailers fail. None of the names that have hit difficulty in the past week will have come as a surprise to anyone who follows the sector.

Survival of the fittest is the first law of retail and by any measure retailers like Habitat, Jane Norman, TJ Hughes and Homeform haven’t been the fittest for a long time. Tired and uncompetitive propositions and astronomic debt burdens spell failure in today’s market. But does that mean these failures don’t matter?

Absolutely not, and not just because of the anxiety their collapses will be causing to the thousands of people who work for these and other struggling businesses across the UK.

The events of the past week matter because they are potentially just the tip of the iceberg. 2008 was bad for retail but, despite the high-profile losses like Woolworths, most decent businesses rode out the recession because a vast group of consumers - homeowners in work - were feeling better off thanks to rock-bottom interest rates.

2011 - and quite possibly 2012 too - could be much worse. Interest rates may still be low, but consumers aren’t feeling well off now. Living standards are under real pressure thanks to soaring petrol, energy and food costs. Many people, especially in the public sector, are worried sick about their jobs and their pensions.

Only weak retailers have gone so far, but while market share is consolidating among the bigger players they are under pressure too, especially in furniture. That’s no surprise because when people are nervous it’s a very easy decision not to buy a three-piece suite, a carpet or a bed.

The fact that the biggest retailers in the field attended hastily convened talks last week organised by the BRC to spell out their woes to the Government and the Bank of England speaks volumes. If the credit insurers or the banks were to lose their nerve, it won’t just be the walking wounded that are tipped into real difficulties.

What furniture retailers wanted from the crisis meeting last week was a route out of the mess. What they heard, by all accounts, was more about austerity, and, frighteningly, the impact another VAT rise would have was discussed.

The Government has a difficult line to walk as it seeks to balance the books. But if the economy is to recover consumers will need to regain confidence, which right now is at rock bottom. That interest rates need to stay low is a given. But for the good of retail, jobs, our high streets and the economy, the Government also needs to stop talking cuts, and start setting out the road back to growth.