Bill Jamieson: Kirkcaldy's sad tale of our Poundland nation

Not all that long ago, Poundland shops were the retail rage. It was not just that we loved a bargain. It was that literally hundreds of everyday small household essentials, as well as small gifts and knick-knacks, could be bought in one outlet for £1 or less.

The Postings shopping centre has been devastated by the growth in online trading

But no-one imagined then that an entire shopping centre with 21 outlets costing £4.25 million to build, could be auctioned off with a reserve price – of £1.

Welcome to the drastically straitened world of The Postings mall, Kirkcaldy. It was as near state-of-the-art as you could get when built in 1981. The 24,500 sq ft mall was just 229 feet away from the high street and boasted a 299-space car park and good transport links. It attracted big name retailers throughout the 1990s. What was not to like?

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But Tesco pulled out in 2015, others followed suit, and today The Postings is a shadow of its early promise. The cost of the annual upkeep of the site is now thought to be higher than the £152,000 it generates from rent, prompting the decision of pension fund Columbia Threadneedle to put it up for sale after failing to attract tenants.

A victim of austerity? Business closures in the area? The migration to online shopping? The chaos and uncertainty of Brexit? Kirkcaldy is not alone in its bleak and debilitating retail decline. Across Scotland and the rest of the UK, hundreds of shopping centres and high streets are experiencing similar retail closure and exodus.

From the comfort of our sofas it’s easy to imagine that retail woes are exaggerated. We scan our iPads and iPhones and shop online – so much simpler and more convenient. And after all, are we not enjoying record numbers in work? And earnings (at last) rising faster than inflation? If this is what happens in these circumstances, what would it be like in a full-blown recession?

The deepening physical scars are evident. Nothing better captures the economic calcification of the UK and its social, cultural and psychological decline than rows of abandoned and boarded-up shops, the steel grille mesh in front of many grim survivors and the spread of food banks and charity shops.

Let’s stop pretending that online shopping makes up for the fall in high street takings and our spending isn’t really all that bad. Something nasty is unfolding. For there is a colossal cost in all this – not just to our pension funds which hurled money at those retail shopping centres and are now having to slash the valuations of those portfolios – but to our social and cultural fabric.

Dwindling footfall hits more than just the retail check-outs. And no amount of regret – from elderly shoppers, for whom a brief chat at the check-out can be their only daily social contact, to the protestations from former local MP and UK prime minister Gordon Brown – can stem the closures. Casualties have included Maplin, Toys R Us, Jamie’s Italian and Poundworld, among others. Just last week Marks and Spencer named the next 17 stores it plans to shut as part of a reorganisation plan, having already earmarked 38 sites – including the Kirkcaldy branch – for closure.

Latest figures from the retail sector bring little comfort. Sales volumes fell back markedly in December after a November “Black Friday” spike and are down 0.2 per cent quarter-on-quarter. Subdued consumer spending, says the EY Item Club, has likely contributed to UK GDP growth slowing to no more than 0.3 per cent quarter-on-quarter in the final three months of 2018. The GfK consumer confidence index also fell back in December to its lowest level since mid-2013. While there has recently been some pick-up in consumers’ purchasing power, it is still far from buoyant, with the savings ratio recently down at record low levels.

Many pin their hopes on real earnings growth – currently on an upward trend and standing at its highest level since late-2016. Annual earnings growth climbed to 3.3 per cent in the three months to October, the best for a decade, while inflation fell back to 2.1 per cent in December, its lowest since January 2017. Also helping matters, employment rose 79,000 in the three months to October to reach a record high of 32.476 million.

But this is to overlook the gap that has opened up between productivity and real wages. As Chris Dillow, perceptive economist of the Investors Chronicle points out, over the long term these should move together. If we produce more, we can pay ourselves more, and if we don’t, we can’t. But the two indicators can also deviate for periods, as now, when real wages are rising faster than productivity.

The two, Dillow argues, must move closer together. This means real wages must fall relative to productivity – for example, if there is a burst of productivity improvement. “But there’s no sign of this”, he points out, “and no reason to expect it. And even if it happens, it’s likely to be because companies shed labour – and rising unemployment is bad for consumer spending. Instead, there’s a danger that real wage growth will fall back. And that means customers won’t have so much to spend. Which is bad for retailers”.

At the same time, there is a disconnect between incomes and spending. In the long term, these must rise together. However, of late spending has grown faster than incomes, with the savings ratio falling to its lowest rate since the late 1950s. That is unsustainable – pointing to a long period of weakness in retail sales: if one of them doesn’t hit spending, the other will. “Easy” fixes such as reform of business rates – welcome though this may be – cannot solve the underlying retail problem.

The glimmer of light at the end of this tunnel is the opportunity for some radical re-imagination of malls such as The Postings in Kirkcaldy. It may seem its construction in 1981 is only recent. In fact, it is 37 years old, during which a new generation has grown up and shopping habits and preferences have markedly changed. The desire to congregate and socialise is as strong as ever. And that is a sure foundation on which new centres like The Postings can build.