Lasting effects of the 2008 financial crisis
Since the last financial crisis, businesses generally struggled to reconcile their post-recession successes. Even where businesses were becoming more profitable mid-decade, they soon felt the crunch from weaker exchange rates forcing up costs and prices, ultimately impacting profit and consequently R&D and innovation. Notably, Marks & Spencer’s 19% decrease in profit saw them fall out of the FTSE 100- for a name that most associate with the UK’s high-street, this story led to questions as to how viable traditional business models relying on walk-in consumers are going to continue to be.
Non-monetary factors were also responsible. Where Links of London’s owners were embroiled in an accounting scandal thus causing reputational damage, Marks & Spencer had long been struggling with a top-heavy business culture criticised for being out of touch with the true requirements of the business.
Pre-Pandemic
Where 2018 was the ‘year of the CVA’ as credited by Lexology, 2019 was the year of insolvency filings- 44 large retailers entered administration in the first half of the year with notable names including Mamas & Papas, LK Bennett and Links of London. Between then and now the economic landscape has changed dramatically, leading to greater strength for the argument that the UK’s high-street is seeing its demise. As regards insolvency, it is quite clear that corporate rescue is now no longer the going priority for insolvency practitioners with creditors keen to get back their debts.
Adapting post-pandemic
Ignoring the impact of Brexit, fast forward to 2021 and the pandemic, and it is quite clear that consumer behaviour in driving the success/failure of companies has been beyond influential, with Deloitte analysts predicting that the rapid shift to online channels in 2020 is a change here to stay with real propensity to impact traditional UK companies’ brand/market power. In order to ensure that more companies do not fall down the slippery slope of insolvency or being bought out by Boohoo (a whole topic in itself), companies must invest in developing their digital presences with emphasis on efficiency through new distribution and logistics capacity.
Although one can remark 'ah that was inevitable’ when it comes to discussing the UK high-street, whether companies learn from their failings a decade ago and adapt accordingly to digital business and consumers’ new preferences now (which involve greater care for sustainability) is a matter yet to be seen.
By Hafsah Nawaz