ALEX BRUMMER: The decline and fall of House of Fraser

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The defenestration of the House of Fraser is a further blow to high streets up and down the nation but is not a surprise.

Department stores have become an expensive luxury and only those with a unique selling point – such as upmarket Harrods, Selfridges and Harvey Nichols – and those with a reputation for good prices and reliable service – notably John Lewis – will be survivors.

House of Fraser has historic problems. Under successive owners and managements it became the buyer of last resort for famous old branded stores, but unsteady and revolving ownership meant it lacked the cash flow and investment to turn their stores into must-go destinations.

Slump: House of Fraser's Oxford Street store in central London has become a desert unable to compete with better resourced upmarket neighbours

Slump: House of Fraser’s Oxford Street store in central London has become a desert unable to compete with better resourced upmarket neighbours

In spite of a focus on upgrading its flagship Oxford Street store the shop had become a desert, unable to compete with better-resourced upmarket neighbours.

There will be a great deal of whingeing from the British Property Federation, representing landlords, over the use of ‘company voluntary arrangements’ used by new or related party owners (as in the case of House of Fraser) to chisel down rents.

Before anyone starts to shed crocodile tears it is to be remembered that for generations property owners, whether they be big real estate companies such as British Land or pension funds, have lived high off the hog on upwards-only rent reviews.

That is why some of the smarter retail chains of the recent past, Tesco and Marks & Spencer to name two, had property ownership written into their DNA.

They did not wish to be at the mercy of landlords who regarded rent reviews as an annuity delivering ever-higher yields.

It is not just rapacious landlords which helped to destroy House of Fraser, Mothercare and up to 100 M&S stores. The Government must also bear responsibility.

The squeeze on public spending initiated by George Osborne cut the subvention to local government from the Exchequer by up to 40 per cent at a time when costs have been rising because of social care needs.

The response of councils has been to ratchet up business rates as a revenue stream.

The Fraser closures are far from random. Most are on older high streets where custom has fallen. Stores on new sites, such as Westfield in west London, will survive.

There is a halo effect in the well-run malls, which are as much social gathering places as shopping emporiums.

Needless to say there is also Amazon, a job creator in logistics, but the enemy of even the most successful names in the shopping centres.

Clearly, the Fraser closures will be a shock for the 6,000 loyal staff affected and risk adding to the dilapidation on many high streets especially in towns north of Watford. 

Nevertheless, there are still new and growing retailers out there from B&M and Wilko, at the no-frills end of the market, to Joules and Superdry.

What goes around, comes around.

Patent loss

The casual fashion in which Masayoshi Son of Softbank sold 51pc of ARM Technologies in China at a knockdown price needs to be examined.

It may not breach investment and headcount undertakings, which ARM made at the time of the 2016 takeover, but it is not in the spirit of the agreements. 

If such a deal were to have been engineered by an American company, the Committee on Foreign Investment in the US, Commerce Department and security services would have been all over it.

 





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