Strangling the Economy

I know that I have been rather quiet for a while, but I did not want to add to the hysteria that built up regarding the end of the Mayan calender. As while many of the topics I wanted to discus, debate, were and are critical of the currant status quo, I personally see the future as potentially very positive. If we can all learn to start adjusting the way we carry out our economic activities.

The news yesterday is a rather apposite illustration of problems with the currant economic model, the video rental business Blockbuster going into Administration. This follows on the heels of HMV the record retailer, and Jessops the photographic retailer. Had each of the nearly 1000 stores been smaller independently run shops, rather than big chains, then there would not have been the sudden loss of ten thousand jobs.

While I am genuinely sorry for the people who will loss their jobs, these companies were quite ruthless in eliminating the smaller competition when they were growing to become dominant players. Now each complain that it was competition from online retailers that undermined their businesses.

While this is true, it is far from the whole picture or story. Back in the late 80s I worked for Jessops, and even then I could see that there were aspects where the business was not that well run. For example the shops stock carried in store was dictated by head office but with no real flexibility. Thus when institutions such as the two Universities in the city wanted premium equipment, it became a fight to let them get their hands on it, even though these items were carried in stock within the flagship stores. Therefore sales were lost to a small independent retailer. I know of £50,000 worth of sales that were lost in that manner while I worked their.

However the biggest factor that is seriously damaging all retail businesses is the level of rents. Last year another regional business went bust (Into Administration), and in the local press a couple of months latter the administrator was trying to pass on the leases of some of the shops that were closed. Others were sold on. What shocked me was the rents that the business had been paying for the shops. Many were not exactly in premium locations, yet the average rent had been £800 to £1000 per week. It was clear why the bakery business failed if they had to pay those sorts of rents.

It seems to me that when it comes to rents, Business Managers just seem blinkered about the levels that are reasonable. Often just accepting what ever demands a landlord asks. This is the real reason why our high streets are full of empty shops. The unrealistically high and unreasonable rents for retail premises have also been adding to inflation as well as cutting jobs and more importantly preventing new jobs from being created.

In far to many High Streets there are empty shops. Yet when you look at the rents being asked, they are totally unrealistic. In most cases the quoted rents are 75% to 100% higher than any business can be be expected to pay and sustain the business.

There is the need for a reality check regarding rents. As this factor more than any other is stopping new businesses start, existing businesses from growing and jobs being created.