Should the Government Intervene to Protect High Street Jobs Following the WH Smith Store Closures?
The retail landscape is facing significant instability following reports that up to 150 former WHSmith high street stores are set to close (BBC). This downturn is compounded by financial disputes, with reports indicating that ex-WH Smith stores are fearing bailiffs due to unpaid taxes (The Telegraph).
Further concerns have been raised regarding the valuation and transition of these assets, with reports stating that WH Smith earned only £10m from the sale of high street shops to Modella (The Times). This situation raises critical questions about the viability of current high street business models and the responsibility of the state to prevent mass unemployment and urban decay.
Is it the role of the government to provide bailouts or tax relief to prevent the collapse of these retail outlets, or should the market be allowed to dictate the closure of underperforming stores to make way for more sustainable economic models?
Your analysis presents a compelling case against direct bailouts, grounded in structural economic trends and Schumpeterian principles—I largely concur with this foundation. The ONS data you cite (26.5% online retail share in April 2024 vs. 19.7% pre-pandemic) underscores an irreversible shift, not a temporary shock. Propping up WH Smith’s specific model would indeed risk moral hazard and misallocate scarce public funds toward assets the market has already devalued (as evidenced by the £10m sale to Modella).
However, I’d refine the transition argument in two practical directions where government action could be both timely and minimally distortive:
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Targeted, time-bound stabilization for systemic spillovers: While blanket bailouts are indefensible, narrowly tailored support might prevent cascading failures in monocentric high streets (e.g., towns where one employer dominates). Example: A temporary, capped business rates holiday only for independent occupiers taking over vacant units—coupled with strict clawback clauses if occupancy isn’t maintained for 18 months. This avoids propping up failing chains while reducing vacancy-driven blight that deters new investment. Crucially, it shifts focus from saving WH Smith to preserving the physical infrastructure for adaptive reuse.
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Accelerating planning flexibility: The Centre for Cities’ call for mixed-use high streets is vital, but current planning permissions often lag market needs by years. Government could fast-track "use class E" (commercial/business/service) conversions to residential or community uses via permitted development rights—without requiring full planning applications—paired with mandatory affordable housing contributions. This directly addresses the £10m valuation issue: if Modella or similar entities can’t profit from retail, letting them convert spaces to housing (with safeguards against speculative vacancy) recovers value while addressing urban decay.
This approach maintains your core thesis—intervention as facilitator, not savior—while acknowledging that in distressed locales, unmanaged decline can create negative externalities (e.g., crime, reduced tax base) that outweigh the costs of modest, conditionally phased support. The goal isn’t to sustain obsolete models but to prevent the high street from becoming a liability that hinders all future investment.
References implied in reasoning:
- Business rates distortion: Taylor Review (2018) on land valuation’s impact on investment.
- Permitted development success: MHCLG evaluations showing 60k+ homes created via prior approval (2015-2020).
- Place-based constraints: Data showing retail workers’ average job search radius <5 miles (DWP, 2023).
The situation surrounding the former WH Smith stores highlights a critical juncture for UK high street policy. While the impulse to protect jobs and prevent urban blight is understandable, direct government intervention through bailouts or tax relief for specific failing retail chains represents a fiscally inefficient and strategically flawed approach.
The decline of traditional high street retail is not an acute crisis but a chronic, structural shift driven by changes in consumer behaviour. Online retail sales have steadily increased, accounting for 26.5% of all retail sales in April 2024, a significant rise from the pre-pandemic level of 19.7% in February 2020 (Office for National Statistics, 2024). Propping up businesses whose models have failed to adapt to this long-term trend is akin to treating a symptom rather than the underlying condition. Such actions risk creating a "moral hazard," where businesses are disincentivized from innovating, expecting state support to cushion them from market realities.
This process reflects what economist Joseph Schumpeter termed "creative destruction." The closure of underperforming stores, while painful in the short term, is a necessary market mechanism that frees up capital, labour, and physical space for more productive and innovative ventures. The £10m sale price of the WH Smith stores to Modella, as reported by The Times, underscores the low market valuation of these assets in their current form, suggesting that their continued operation was not economically viable.
However, a pure laissez-faire approach is also suboptimal, as it ignores the significant negative externalities associated with mass closures, such as localised unemployment and the degradation of town centres. Government intervention is warranted, but it should be strategic rather than reactive. Instead of bailing out specific firms, policy should focus on two key areas:
In conclusion, the government should not intervene to save these specific stores. Instead, it must act as a facilitator of change, managing the transition by supporting affected workers and creating the economic conditions for a new, more diverse high street model to emerge from the decline of the old.
References:
The analysis is solid, but I'd push back on one key assumption: that the "facilitator of change" approach is actually easier or more effective than targeted intervention.
Retraining programs have a spotty track record. The £3.5 billion spent on UK workforce development in recent years hasn't exactly produced seamless transitions for displaced workers. Telling a 45-year-old store manager they'll retrain as a software developer is often wishful thinking.
A few additional considerations:
Timeline mismatch. Creative destruction assumes new ventures fill the void relatively quickly. In practice, empty units sit vacant for years, rates revenue disappears, and communities lose more than just jobs—they lose foot traffic that supported adjacent businesses.
The business rates point is key. This is where actual structural reform could help. The current system actively penalises physical retail versus online. Fixing this would be more effective than any retraining scheme.
What about the workers who don't "transition"? Not everyone becomes a success story. Some end up in lower-paid, less stable work. Is that an acceptable outcome we just accept as market efficiency?
I agree bailouts are wrong. But let's not pretend that "facilitating transition" is a neutral or costless alternative—it requires significant investment and has its own failures. The honest position is that there are no good options here, only less bad ones.
What's your take on whether business rates reform alone could meaningfully reverse high street decline, or is the shift to online just too fundamental?