An Alternative Spring Statement

The last Government kicked many small and medium entrepreneurs in the teeth. This new Government has made all that much worse.

Rachel Reeves’ Spring statement, an emergency budget by any other name, will accompany what I assume will be her short period at Number Eleven Downing Street and go down as just another stage in the UK PLC’s unnecessary decline. The real economy is in recession and will stumble on. But she has made things far worse.

She is also unlucky, having been caught holding the last reveal of a “pass-the-parcel” full of historic economic mismanagement. Previous Chancellors of the Exchequer and overbearing Prime Ministers have bequeathed their legacy to her. The Office of Budgetary Responsibility (OBR), which audits the Chancellor’s budget proposals, operates on the same neoliberal, Keynesian, mass net immigration, high debt, and high spending presuppositions that got us into this mess.

As inept as Liz Truss was, she found out, to her cost, that stepping outside the eco consensus will get you squashed. Andrew Lilicos' take on what actually brought down Truss is a long read, but this interview is well worth a listen. When politicians come to run the British economy, they frequently lack any real economic or business experience.

Our inefficient Public sector is struggling, our tax revenues maxed out, our private industry, from whence all the real money comes, is being purloined for Keir Starmer’s fantasies, not least the recent Churchillian posing to “biff” Putin on the nose.

I have outlined what I think is inevitable in Lessons from America: "Too Much Winning" -every lunatic policy of this and the last government will have to go. Reeves and Starmer are in the “bargaining stage”, rebadging minor cuts in government departments as decisive, limiting minor welfare payments as significant incentives to get people back to work and off the welfare rolls. But the “crackdown on people traffickers” - well, this one is so lacking in substance it can be dismissed without reflection.

The notion that we are increasing defence spending, rearming, facing down Putin, holding Trump accountable over the Ukraine peace deal, or commanding a coalition of “the willing” to put troops on the ground in Ukraine as peacekeepers, or anything else is all hapless spin, waffle, and posturing, eagerly consumed by our mainstream media. The Coalition of the Willing was not that willing after all.

But setting this lofty mirage aside, just over a year ago, I wrote No One's Got No Money Mate, initiated by an off-hand comment by a shop assistant at one of the local Aldis, my preferred supermarket vendor. I wove the blog around the community of employed, hardworking, low-paid, working-class families contrasted with those recently welcomed into our country, allocated housing and welfare by our elites and the activist class. It’s a good blog and worth a read.

Before Christmas, I noticed my local Homebase was closing down. As any UK avid DIYer will know, Homebase had a chain of large DIY, gardening, and furnishing outlets at the market’s slightly more pricey end. Only the suburban and countryside retailers could get away with more inflated prices.

The cheapest outlets were Poundland, B & M, Argos and Wilkinson’s, which are suitable for basic gardening and domestic items - the latter’s range of seed potatoes was extensive and not that expensive. You have Screwfix, Selco and the market leader B & Q, which includes trade discounts. We should not overlook mid-range Wickes.

Even if you are doing significant projects, it is hard, though not impossible, to get a better deal from small builders’ merchants for things like treated wood for garden decking. There was a time I would drive around various outlets, comparing prices. These days, you can do it online.

The British economy has various drivers, of course. Still, the one that more accurately reflects what is going on for the mid-range family is this domestic housing market and the attendant DIY and broader building trade. When families have the money to buy a new bathroom or kitchen, and builders are incentivised to develop and “flip” older properties for the market, then the DIY stores are full. The boom in the housing market saved Margaret Thatcher from monetarist deindustrialisation and the mid-eighties slump.

When this industry takes off, it shows on the streets as gardens are better kept, fences are repaired, weeds are pruned, and painting is touched up. Skips become more visible as houses undergo renovation, and you see plumbers’ vans parked outside as new combi boilers are installed.

The Homebase store (above) closed down. Just before that, I spoke with a guy who had worked for them for decades and knew the warehouse, aisles, and everything about the company. His take was not atypical for the British high street: an unwise foreign takeover of the company during the lockdowns, when many stuck-at-home men gave in to their wives' nagging and completed various projects that they were going to do “when they had time.”

My own plumber at the time was sent home because he smoked like a chimney, had a chronic obstructive pulmonary disease (COPD) diagnosis and would have been susceptible to covid. He sat at home answering phone calls from the younger plumbers over various tricky problems. Eventually, his wife prevailed, and he started the list of projects he had been putting off. By the end, when I coaxed him to look at a leak in my kitchen, he had completed 16 projects. He was not atypical.

“Managing director Damian McGloughlin wrote to suppliers in August that the business was “behind where we planned to be” and that an “active sale process” was underway to seek new investment.

It is understood that talks have now taken place with Kingfisher and popular bargain retailer B&M, neither of which has resulted in a deal.

Hilco acquired the company in 2018 for £1 after a disastrous 18-month tenure under Australian conglomerate Wesfarmers.

After sacking the senior management team and making a raft of unpopular changes in-store, the multi-national company made an estimated net loss of £1bn in just a year and a half.

If no deal is struck in ongoing negotiations, the loss of Homebase would mark a fresh blow for the struggling British high street. The past few years have seen the closures of The Body Shop, Wilko, Carpetright, and Paperchase, and reports show that an average of 38 stores will close a day in 2024.

Homebase CEO Damian McGloughlin said: “It has been an incredibly challenging three years for the home and garden improvement market.

“Against this backdrop, we have taken many wide-ranging actions to improve trading performance, including restructuring the business and seeking fresh investment.

“These efforts have not been successful, and today we have made the difficult decision to appoint Administrators.””

My Homebase worker claimed the takeover overestimated that the surge in lockdown and furlough DIY would carry on, so they invested in restructuring some of the bigger stores. They got it wrong, as after the lockdowns, we had the marked 2022 surge in inflation, and people tightened their belts. The Homebase owner’s plans went for a Burton.

Typically, as I walked around the store looking for a bargain, there were none to be seen. Homebase had a good range but was not ready to cut costs to clear the inventory. I felt for the chap. He knew everything about the company, the market, and the customers; if the higher-ups had been able to sample his views, it would have helped.

Homebase now exists as an online store.

Hilco bought the Homebase chain for one pound in 2018. But this is not a critique of the vagaries of the buying and selling of popular high street and retail park footfall businesses employing thousands; neither a comment on international investors with no loyalty to the country and no doubt occasionally getting it right and occasionally getting it wrong; and this is not a critique of the “capitalist system”, the DIY market appears at least externally, to be competitive, whether a limited number of hedge funds own all the companies I do not know.

But the two points I will conclude with are, firstly, the move to online sales, as companies divest themselves of expensive, over-taxed, physical premises in favour of out-of-town warehouses and delivery, along with scanning devices in any remaining supermarkets, and the inevitable reduction of employees. Second, the consequent fall in face-to-face customer service and the rise of AI, with website or smartphone communication, that frequently traps you in the loop of artificial unintelligent chat, unlike the guy on the Homebase shop floor.

We are information-rich, with masses of web pages and PDF downloads, but when you need that bit of advice, there is no one to be seen. Human beings crave conversation; they weigh up a product based on the person they get to talk to. We observe body language. I trust my local garage because the guy I talk to is a central part of my evaluation.

The woman who sold me my petrol car was the only person I have met who runs an electric car. And whilst I remain very skeptical, after probing her answers with more questions, and evaluating her thoughtful responses, she convinced me that the electric car she had brought was economical and reliable for her purposes. These face-to-face exchanges fill out our perspectives, balance our prejudices, and condition our perspectives.

The Homebase branch sign is fading fast. Walk to the left, and the former Argos store is still empty. Having moved across the road to smaller premises in Sainsbury’s, the Poundstretcher is now a Salvation Army second-hand outlet. Two new coffee shops have been built based on the post-lockdown footfall through this retail park. I doubt their business models are doing well, with some of the principal outlets now empty: And that’s the keyword empty.

When the overleveraged household name Woolworths closed a decade ago, Poundstretcher or Wilkinsons stepped in. They took on the premises and staff - albeit with lower pension deals. Then Wilkinsons contracted, and others stepped in. But now, increasingly, the companies in the ecology of DIY and furnishings are downsizing the size of their stores and moving online. The shop fronts are empty.

With each of these changes, the number of staff required diminishes. The engine of job creation for middle to lower-income families has always been small to medium-sized businesses, not necessarily these big chains. The local, the specific, the speculative, the passion project, or the high-skill niche, with on-the-job entry-level jobs and training.

The National Insurance hike from Rachel Reeves has just come into force, whilst those on the national living wage were also awarded a mandatory 6.7% pay increase to approximately £23,500 full-time equivalent (FTE) a year. For a medium-sized business with a £850,000 turnover and say 24 FTE staff with salaries around £27,000 - not that way above the living wage - the National Insurance tax hike for such a company is circa £22000, deterring them from taking on another staff member or filling a vacancy when it comes up.

So-called “zero-hours” contracts, which normal people call casual hours, provide flexible additional capacity to businesses when needed. The government has targeted these for increased workers rights and greater restrictions on employers. The upshot will be fewer entry-level flexible posts being created and fewer employers taking risks by employing casual seasonal staff.

Drive around the high streets, retail parks, and shopping centres, and there are too many empty outlets. They are waiting for the government to make it more profitable to open them up, they are waiting for entrepreneurs to see some inducement to take a risk, and the smaller shop fronts are waiting for someone to risks their all on a dream business idea, that they will slave over with barely break-even returns and relentless passion. The last Government kicked many small and medium entrepreneurs in the teeth with their unnecessary lockdown, self-imposed recession, and zero-carbon restrictions.

This new Government has clearly made things worse.