Economic policy gives rise to ‘ghost towns’

THE SCOTTISH GOVERNMENT made quite a fuss over the recent announcement that Amazon has decided to expand its Scottish based fulfilment centres. Alex Salmond, no less, was wheeled out to declare that he was “delighted with (Amazon’s) decision to expand its Scottish operations and to create 950 jobs.”

Of course, if Amazon’s centre was not built in Scotland it would certainly be built somewhere else. So we should probably be glad of the jobs.

But we should also be aware of the price, which amounts to £6.3m for support of construction costs, £2m in regional selective assistance, and £500,000 for training. The total financial support provided amounts to nearly nine million pounds, over £9k for every new job created.

In a previous life, Alex Salmond used to be Chief Economist at the Royal Bank of Scotland and, as a professional economist, he will no doubt be well aware of the other costs of Amazon’s expansion. He will know, for example, that it was competition from Amazon that forced Borders to close its UK operations with the loss of 1,100 jobs, including their much-loved store on Glasgow’s Buchanan Street.

The remaining significant physical books and music retailer, HMV are also hurting and are planning to close 60 stores, including 20 Waterstones. The giant Arcadia group (which owns Burtons, Dorothy Perkins, TopShop and Wallis) has recently announced that they plan to close 300 shops, and Game are shutting 90 of their branches.

The think-tank NEF (New Economics Foundation) has catalogued shop closures over the last few years, including 807 Woolworths, 220 Barrats, 214 Celebrations, 125 Zavvis, 55 JJB Sports, 111 Adams, and 66 Principles, all of whom have departed our high streets. They calculate the total job losses from major closures (up to 2009) at 41,906. One wonders how many of these jobs would still have been lost if there had been £9k each available to support their retention.

NEF report, in particular, that Dumfries has turned into a ‘ghost town’ with 30 empty stores, including half of the units in the out-of-town retail park at Cuckoo Bridge. And, of course, this picture is replicated in every town and city across the country.

I should perhaps declare an interest here. Last year I became a partner in a new, independent, specialist retail business in central Edinburgh, so maybe I have developed a new respect for the hard-pressed retailer. Needless to say, my shop has not attracted any financial assistance for construction or fit-out and, since we are trading from the middle of Edinburgh, we are certainly not eligible for regional selective assistance which are targeted at new warehouses in Fife.

But our towns and cities need their range of shops; they are at the centre of our communities. As NEF puts it: “Locally rooted, independent retailers relate differently to the communities they serve. In economic terms, more of the money spent in them is liable to stay and re-circulate in the local area.

“They are more likely to support other local businesses too, rather than procuring the goods and services they need from other remote national and international suppliers. In difficult times, locally rooted stores are also more likely to go to greater lengths to remain open, doing whatever they can to keep trading.”

You might think that government economic policy should be geared to creating the sort of society that we actually want to live in. Do we want to live in ‘ghost towns’?

The way that our industrial support systems are applied you might well think so.