Resolution Foundation publishes report on state of UK retail

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In their “Sorry, we’re closed” report published in February, British think tank The Resolution Foundation dives into the data on UK retail and what this means for policy makers, asking the central question, “What does economic change look like for the people and places it happens to?" Co-authored by Daniel Tomlinson and Laura Gardiner, the report identifies trends from the past two decades years concerning the role of online retail, the sector’s share of employment, pay, the spatial distribution of changes across 317 UK councils, as well as a number of other finer aspects including the state of retail as a place to work. These pillars provide a multi-dimensional, data-backed view of retail that goes beyond anecdotal notions of retail being dead, dying or destined for doom.

The prevailing stat or condition for the research is the unprecedented increase in online commerce. Partly technological (the internet and evolution of hardware as enablers) and human (we’re OK with buying our fresh produce from a website), this surge can’t be ignored and acts a firm background on which changes in UK retail can be placed. The report cites 2017 data, which indicate that there were 35,700 online-led retailers in the UK, compared with general retailers, a set of 37,600. General retailers may also derive significant revenue through online sales and warehouse-to-home delivery, but their investment in physical space and employment contrasts with digital-first newer-comers (and also account for the greatest share of revenue). Include speciality retail or all businesses that foremost term themselves as retailers, and the UK had 208,000 retail businesses in 2017 (21,000 more than 2015). When compared across time, online accounted for 5% retail in 2008 and 18% in 2018, employing 2.9 million people with a sector turnover of £400 billion.

This broad shift to online represents a rising tide, not a cyclical phase. The invention of online retail isn’t going away and though some products have experienced a resurgence against remarkable odds (see bookseller Waterstones), the general trend is for SKUs to be slowly cannibalised for first-hand and second-hand markets. More subtle are the changes across sectors, which continue to absorb and throw out workers over time.

When the entire workforce is considered, retail’s share of employment has been falling since 2003. Back when New Labour was in government in 2003, 10.8% of the workforce derived their main income from retail. In 2018, the sector accounted for 9.5% of UK employment. If retail’s share hadn't fallen over this period, there would be 320,000 more people working in the sector. This drop is in fact small when compared with reduced share in manufacturing, which has seen a downgrade in share from 16% in 1997 to 9% in 2009.

Each sector’s representation of employment should also be weighed against real wages. As The Resolution Foundation noted at their “The Jobs Boom” presentation in January, yes, UK employment is at a record high (75.8% at the start of 2019), but wages aren’t outstanding (there are more people who need work). Retail hasn’t showed too badly in wage gains, with hourly pay increasing 5.2% between 2009 and 2018. By comparison, wages in Residential Care across the same period saw a reduction (-0.8%) as did Manufacturing (-1.5%). Hospitality emerged as the biggest winner, seeing a 9.0% increase. As a yardstick for net wage, the percentage of a retail worker being the main earner for a family decreased from 34% to 30% between 2002 and 2018.

Geographical distribution of change is another useful category of the report, especially within the conversation of territorial politics and a schism that was well manifested in the Brexit Referendum. Changes in retail have been more diffuse than those in other sectors, meaning that alterations in the sector are geographically distributed and retail opportunities don’t crumble as rapidly as, say, Manufacturing, where changes are more concentrated with entire facilities closing in areas that largely depended on the anchor employer. The councils of Dartford, Watford, West Lancashire, Nuneaton & Bedworth and Wakefield emerge as the top five losers in retail employment, with Wakefield seeing a drop of 9,000 people since 2009.

As a type of work, “Sorry, we’re closed” identifies retail’s special position for employment and its role in the growing concern for atypical work. The greatest concern is a rate of churn of 19% - the proportion of people who enter or exit the sector each quarter. Fundamentally, retail has the highest outflow rate of any sector due to redundancy (31% compared with 26% as a national average), and those that do leave have longer unemployment durations than other workers exiting roles in other sectors. An unemployment duration is deemed as six months or greater, accounting for 41% in retail, only exceeded by unemployment periods in Energy, Agriculture & Construction which stand at just over 45 (the cross-sector average is 38%). The report highlights the tension directly: “There may therefore be a tension between the jobs unemployed ex-retail workers want and the jobs available to them, perhaps contributing to their worsening unemployment durations.” Worryingly, roughly three-fifths of the long-unemployed are under the age of 30, despite making up one-third of retail’s workforce.

Present at the report’s launch talk at The Resolution Foundation on 27th February were Sir Charlie Mayfield, Chairman of The John Lewis Partnership, and Jo Miller, Chief Executive of Doncaster Council, reflected on the changes they’ve been seeing in the sector.

In Doncaster, previously a Northern backwater with a stagnated town centre, a 20% vacancy rate in retail reflects the poor state of urban real estate. Doncaster has an unusually low proportion of office space in its town centre, at 19% of the centre (normal occupancy would be 51% in a city of its size). Miller and her team have focussed on placing education institutions in the town centre to increase footfall to retail stores, and have worked on making the area more welcoming by meeting the needs of rough sleepers - there were 67 rough sleepers at the height of summer 2018, and by February 2019, 60 had found housing, leaving only seven.

Mayfield’s observations align with The Resolution Foundation’s that retail has an enduring role in providing employment for a broad range of people in society. For Mayfield, the sector offers more than just scale (it accounts for the largest private sector employer), providing flexible opportunities for young and returning workers, with positions available near to where people live. At the same time, Mayfield highlights that young males aren’t joining the retail workforce, suggesting that there are some systemic concerns with the sector’s appeal.

Find the full “Sorry, we’re closed“ PDF including graphs, and view February’s “Taking stock?: What do changes in the way we shop mean for jobs in retail?presentation on YouTube (1hr 16 minutes). Header image: Ali Yahya.