HMV closure a sign of the times for retailers

Perhaps it is an age thing, but I was deeply saddened over the past few days when it was confirmed that the HMV stores would not be re-opening in Ireland.

HMV closure a sign of the times for retailers

As a frequent visitor to the store in Grafton St and a not infrequent or ungenerous contributor to its coffers, its demise will leave a large void in my life.

It is sad that during the recession, too many household names are disappearing from our streets. It would appear that the only stores opening are charity shops, mobile phone shops, German discounters and Tesco Expresses. I could easily live without any of those, but it is a real sign of the times.

The travails of the retail sector are down to many factors. First and foremost, consumer spending has taken an awful battering over the past five years, and with property taxes, water charges, higher motoring costs and much more still to hit people’s pockets, it seems a forlorn hope that a meaningful rebound in consumer spending is likely anytime soon.

The cost base facing retailers is another major issue. Local authorities are still extracting penal commercial rates from businesses and unfortunately to date, no serious attempts have been made to reduce the cost of local government and pass on the savings to business in the form of a commercial rates holiday — that would represent real economic stimulus.

The other big cost issue is rent. The Coalition came into power on a promise to abolish upward-only rent reviews on existing leases. When in power the Government quickly discovered that legally it would not be possible to adjust these leases due to likely litigation from landlords.

Many commercial rents have adjusted downwards in recent times as many landlords have realised that it is better to have a tenant paying some rent than a tenant going out of business.

However, big institutional landlords have been a lot less anxious to compromise. These are primarily pension funds and these properties are part of investors’ pension funds. If the lease is adjusted downwards, the value of the pension fund will suffer, pension holders will take a hit and the business of the fund will be damaged.

It is a bit of a Catch-22 situation, but one would have to conclude that it would be in the best interests of society in general to change the legislation on upward-only rent reviews, face the legal consequences, and try to create a sustainable retail environment from which would flow tax revenues, employment and other desirables.

Finding a legal solution to the issue would be a job well done by Government. I am sure a referendum to amend the Constitution to enable the legislation be changed would be popular.

It remains to be seen what impact last week’s debt deal will have on the consumer environment.

The removal of the need to come up with €3.1bn every March until 2023 and instead just pay the annual interest bill on the long-term sovereign bonds that have replaced the relatively short-term promissory notes will significantly reduce the financing pressures on the minister for finance over the coming years.

This is good, but critics are still not happy. I cannot understand how it would have been possible to avoid paying back the promissory note monies. If we refused, or in other words defaulted, the consequences for Ireland would not have been good.

Drawing comparisons with Iceland is spurious at the very least, given how different Ireland is from Iceland, and to cite the example of Argentina simply does not stack up.

From my understanding of what happened in Argentina after the default and the problems it is still having, going that route would not have been a good idea.

Enda, Michael and Patrick Honohan should take a bow for a job well done in the circumstances.

x

More in this section

Cookie Policy Privacy Policy Brand Safety FAQ Help Contact Us Terms and Conditions

© Examiner Echo Group Limited