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Next offers hope, but retail needs more cheer

Terry smiling headNext always kicks off the festive trading update season and, as ever, it sets the tone for the sector’s performance at its most critical time of the year.

A 1.5% rise in sales will clearly give some encouragement, and help suppress feelings of anxiety in the run-up to Christmas when figures pointed to an overall decline in sales.

However, even this relatively upbeat statement from Next offers a few warnings. Drill down further and the uplift is entirely in online sales which rose 13.6%. Sales in stores were down by more than 6%.

This will add weight to the campaign for more help for high street streets which witnessed a much lower footfall during the traditional Boxing Day sales.

The malaise spreads to some out of town retail parks. While some shopping malls, such as the Intu centres, have performed well, others have shared the bricks and mortar slowdown.

Added pressure to these trends is a proposal from the Scottish government to impose further levies on out of town retailers. While this is a well-intentioned measure to help town centres, it is more likely that it will merely add to overall costs of doing business.

The Scottish government promised to work with Scottish retailers to develop a growth strategy for the sector.

New data from the Scottish Retail Consortium, which describes the out of town levy plan as ‘wrong headed’, reveals that the industry still accounts for 13% of all new firms formed in the last year.

However, it also reveals a drop of 16,400 jobs over the past eight years, down 6.3%. During the same period there were 1,831 fewer shops, a 7.5% reduction.  Net profitability in the industry has dipped to around 5% of the value of sales.

Embracing these changes and becoming more productive requires retailers to invest in new technology, a higher skilled workforce, revamped warehouses and transformed logistics capabilities.

Already there are added costs such as the apprenticeship levy, increases in the living wage and higher business rates bills.

No wonder the sector needs the Scottish government to think carefully before imposing yet more costs.

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