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UK Rail Strike Leaves Retail Near Standstill

High street retailers in the U.K. on Tuesday were in a world of pain on the first day of a British rail strike in 30 years that emptied city stations and kept consumers away from shopping destinations.

Britain’s biggest in 30 years, the rail strikes slated for Tuesday, Thursday and Saturday center on a pay dispute between unions and government. Tuesday’s strike resulted disrupted the rail network and compounded a separate strike at the London Underground, akin to New York City’s subway system.

The strike action drove high-street footfall down 8.5 percent versus last week, according to U.K. data research firm Springboard. In Greater London, footfall fell 17.7 percent week-over-week. Digging deeper, footfall dropped 27.0 percent in Central London, and 17.6 percent in the West End. Areas heavily populated by office buildings saw foot traffic plummet 24.6 percent.

Compared with 2019’s pre-Covid numbers, footfall was down 19.3 percent across U.K. high streets, and down 34.6 percent for the Greater London area. Central London dropped 49.2 percent, while the West End was down 46.0 percent. For the office areas, footfall was down 45 percent.

“The impact on train and tube strike today on footfall is very clear to see, with a large proportion of people clearly working from home,” Diane Wehrle, Springboard’s insights director, said, adding that footfall fared better in Outer London and in market towns less reliant on commuters.

She said the 49.2 percent decline in Central London from 2019 levels is comparable to the drop recorded during the Covid lockdown.

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While buses are running, consumers were warned of overcrowding and congested roadways.

It’s unclear how long the strikes will continue, even as labor talks continue. The union is seeking a 7 percent pay hike, while the state-owned operator is eyeing a 2 percent increase as commuter patterns have yet to return to pre-Covid levels.

Roughly 40,000 signallers, maintenance and train staff, and train operators are involved in the strike. Train drivers, represented by a different union, are also expected to walk soon.

U.K. Prime Minister Boris Johnson has indicated that he could allow the use of temporary workers from recruitment agencies. But doing so could anger and alienate unions that might instead dig their heels in deeper when they should be negotiating a resolution.

Worker compensation has become a hot issue as rising inflation is taking a toll on consumption. Consumers are seeing gas and food take a bigger chunk of their income, leaving less to spend on nice-to-haves like new clothes and products for their homes.

In Germany, the country’s most powerful union is pushing for sizable wage increases, while France faces unrest over pension reforms.

And in the U.S., Lenore Elle Hawkins, founding partner of boutique advisory firm Calif Advisors Partner, said the “state of the consumer has really deteriorated faster than we’ve  ever seen in decades.”

“We saw in the first quarter that the economy has contracted,” she said in a Yahoo Finance interview this week, pointing to an already sluggish second quarter. Both “consumers and small businesses are telling us that the recession is already here,” she added.

Last week’s Michigan Consumer Sentiment report “blew away the lows that we have seen over the past 11 recessions,” she continued. “Consumers are hurting that much.”

The preliminary University of Michigan Index of Consumer Sentiment for June tumbled to 50.2 from May’s 58.4, a drop from 85.5 a year ago and the lowest reading since data collection began in 1978.

NRF vice president of supply chain and customer policy Jonathan Gold this week reiterated that “inflation will be with us for some time.” Gold went on to note that 58 percent of U.S. households are now tapping savings or charging to cover expenses. Labor and household balance sheets “can only hold up so long in the face of persistent inflation,” he added.

UK retail job losses pile up

The rail strike adds to British retail’s long-standing woes.

The sector has lost 645,204 jobs since 2017, with little relief coming for a heavy tax burden that threatens additional fallout for retail.

The Centre for Retail Research (CRR), which tracks data in the U.K., Europe and North America, shows that U.K. retail job losses so far this year through May totaled 18,271, based on 1,101 store closures. The retail research firm’s data shows that 72,580 retail doors have closed since 2017.

“The biggest change occurred with the 2020 figures,” CRR director and professor Joshua Bamfield CRR’s wrote in an email.

During the height of the pandemic in 2020, the sector loss 182,564 jobs as 16,045 retailers closed stores. Over the past five years, insolvencies, creditor deals, and routine store rationalizations drove closures.

E-commerce gets some of the blame for the UK’s shrinking brick-and-mortar presence. Shoppers are unlikely to abandon their digital habits anytime soon.

Walmart woos UK sellers

Earlier this month, Walmart began courting U.K. vendors to its flagship U.S. Walmart Marketplace platform amid competition with Amazon and eBay’s platforms. Walmart said its dot-com marketplace serves “more than 120 million loyal U.S. shoppers each month.” Sellers approved to join the platform can access services to “scale up across the Atlantic, including the opportunity to get their goods to U.S. customers within two days.” They’ll be able to tap into Walmart’s U.S. supply chain infrastructure.

“We are confident that U.K. sellers will be able to leverage Britain’s reputation for design and manufacturing excellence and product quality to thrive as Marketplace sellers and bring more choice to our U.S. customers with speed and scale,” Darren Carithers, senior vice president of marketplace development for Walmart International, said.

Walmart also said the move to embrace U.K. exporters coincides with the British government’s efforts to promote U.K. goods beyond the European Union with its “Made in the U.K., Sold to the World” campaign. Walmart will host a U.K. Sellers Summit in Londong on Friday, along with payments firm Payoneer and inventory and order management automation platform Linnworks.

Northern Ireland-based wearable tech firm STATSports, Glasgow-based home and garden products company BuyBox, Bridgend, Wales-based sporting equipment company Red Dragon, and Leicester-based Pertemba, which sells over 100,000 product from more than 200 British brands, including apparel products are already Walmart Marketplace sellers.

‘Spending bubble has burst’

Meanwhile, rising inflation could be a problem for U.K. fashion retailers.

“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers’ spending power,” Helen Dickinson OBE, CEO of the British Retail Consortium (BRC), said. “Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.

Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers,” she added.

Despite sales declining overall, fashion fared better than high-ticket items such as furniture, as consumers “prepared for the holidays abroad and the summer’s social calendar,” Dickinson pointed out.

The BRC has been urging the British government to cut the shops tax to relieve the burden on store operators. Last October, it said “four out of five retailers would be forced to close additional stores across the country” if nothing was done, further hurting local communities.

Known as the business rates, the shops tax is essentially a property tax that businesses pay based on hypothetical rent values. Although some stores have seen their monthly rents decline, business rates haven’t changed.

Prime Minister Boris Johnson last month said legislation to reform business rates is in the pipeline. and would shorten the revaluation period to three years from its current five-year cycle.