An inevitable consequence of the Coronavirus will be the acceleration or magnification of existing trends – be it towards home working or the intensification of the shift from physical to online shopping. Doomsayers who have portended the high street apocalypse in recent years may feel a sense of grim vindication following recent news of Debenhams, Cath Kidson, Laura Ashley, Animal, Oasis and many others closing their doors.
There are decades where nothing happens and there are weeks where decades happen, so said someone, but in the pre-lockdown era (five weeks ago) around 14 shops were shutting down every day. Retailers reported that 2019 was the worst year for sales in a quarter of a century. In recent years hundreds of thousands of retail jobs have been lost.
Undoubtedly, when businesses fail to adapt and modernise, they are stymied by new technologies with leaner business models and more efficient processes. This is Joseph Schumpeter’s creative destruction in action. But the true picture is more nuanced.
First, the demise of the high street isn’t inevitable – on balance, it may not be declining, even though social distancing (compulsory or not) will likely persist for years. Second, its woes cannot simply be put down to the wicked forces of e-commerce (under normal circumstances). Third, the creativity and adaptability of a market economy will be given free rein post-coronavirus. Retailers can, and should, capitalise on the opportunities that emerge.
What’s more, an increase in home working, combined with business failures shrinking demand for office space will lead to vanishing rents. If business rates are revalued frequently enough, rents will have to drop to fill spaces. Though they come under near-constant criticism, economists left and right tend to think of business rates as a good tax. Even though it’s businesses that write the cheque, they say, it’s landlords who actually pay business rates. When rates go up, rents go down by the same amount, and vice versa.