British town Walsall pays dearly for UK retail crisis

A shopper enters a mini market in Walsall on November 29, 2019. With its deserted streets and closed shops, the center of Walsall bears witness to Britain's retail crisis. (AFP)
Updated 02 December 2019

British town Walsall pays dearly for UK retail crisis

  • The retail crisis hitting Walsall and its 270,000 inhabitants is mirrored across Britain

LONDON: With its deserted streets and closed shops, the centre of Walsall bears witness to Britain's retail crisis that political parties campaigning for election have vowed to fix.
It's difficult not to be struck by the multitude of "to let" signs on unoccupied shop fronts in the town in central England, near Britain's second-largest city Birmingham.
One of the few to resist the slew of closures is Poundland, a UK-wide chain selling items mostly for £1 or less.
"All the big stores have gone and have been replaced by rubbish stores to be honest," said passer-by Susan Humphreys on a freezing day in November.
"I do go online a lot more now," the 70-year-old told AFP.
The retail crisis hitting Walsall and its 270,000 inhabitants is mirrored across the UK.
No sector has been spared as independent shops and department stores struggle to survive faced with fierce online competition, notably from Amazon.
Shops are also suffering from higher business taxes and wider political uncertainties caused by Britain's stalled departure from the EU that the December 12 vote could resolve.
"Areas like Walsall which have suffered from decades of industrial decline, the impact of the change in retail has had a disproportionate impact," noted Simon Tranter, head of regeneration and development at Walsall Council.
The result is that many locals struggle to make ends meet, with child poverty and child mortality rates well above the national average.
Walsall's two parliamentary constituencies have historically both been represented by Labour but Prime Minister Boris Johnson's Conservatives narrowly won Walsall North in 2017.
The area meanwhile voted 68 percent in favour of Brexit.
Johnson has said part of the reason for the "leave" vote in 2016 was that struggling towns up and down the country felt they been "overlooked and left behind".
Both the Tories and Labour have pledged to lessen taxes for businesses should they win the upcoming election.
But for Corin Crane, chief executive of the local Black Country Chamber of Commerce, the damage is done.
"The downtown business will never come back as before," he told AFP.
Even if Walsall's Primark store selling cheap clothes is busy, the closure of food-to-clothing retailer Marks and Spencer 18 months ago has been a major loss.
The huge brown brick building it occupied lies empty, adding to the downbeat atmosphere enveloping the streets.
"I'm sure it will remain empty for a couple of (more) years," said one local newspaper-seller, standing a short distance from a closed Burger King and an empty Bonmarche clothing store.
Once a centre for making saddles and other leather goods -- the local football team is nicknamed "The Saddlers" -- Walsall enjoyed a retail boom in the 1980s.
But it gradually fell on hard times. One critic once even described Walsall as one of the ugliest places in the world and "like Ceausescu's Romania with fast food outlets".
A decade of government austerity measures have worsened the situation.
One public health body ranked the town the UK's second-most unhealthy area in which to live, in part owing to its high number of betting shops and stores selling alcohol.
"Since the banking crash in 2008, the government has invested very little money into local areas," said Crane.
"Areas like Walsall have struggled to keep up with that."
Walsall also suffers from its proximity to Birmingham, which has been extensively redeveloped in the last 20 years, attracting vast sums of investment.
Britain's second city is also preparing for the new high-speed HS2 railway set to slash journey times between the city and London.
There have been several attempts to regenerate Walsall over the years, including around a modern art gallery opened by Queen Elizabeth II in 2000.
The latest bid to rid the town of its unenviable reputation is led by Andy Street, elected mayor of the West Midlands region and a former head of the department store chain John Lewis.
A thorough cleansing has removed 365,000 pieces of chewing gum stuck to outside areas, while pigeons have been chased away.
A 20-year modernisation programme has meanwhile been launched, set to cost at least £100 million ($129 million, 117 million euros).
"We need more people living in the town centre" to replace the shrinking retail space, said a spokesperson for Walsall council.
"This is our last chance in terms of pushing this town forward and bringing it into the 21st century. It's a stark as that."


INTERVIEW: Home ownership in the corona era

Updated 7 min 51 sec ago

INTERVIEW: Home ownership in the corona era

  • We want to make sure that every riyal of subsidy is used to its most effective extent

What a difference a pandemic makes. At the turn of 2020, Fabrice Susini, CEO of Saudi Real Estate Refinance Company (SRC), could look back on two years of significant progress toward the provision of affordable home ownership for the Kingdom’s aspirational young population.

Increased property ownership was one of the main aims of the plan to diversify the Saudi economy away from oil dependency, setting a target of 70 percent home ownership by 2030.

It was all going to plan. New mortgage issuance had been “staggering,” Susini said, and SRC had reached its target of facilitating 60 percent home ownership with months to spare.

“It was a very positive story,” he said, allowing him to work on the next phase of Saudi Arabia’s move toward being a home-owning economy — buying more mortgage portfolios from banks and other mortgage originators, injecting more liquidity into the housing market via domestic and international sukuk issuance, and offering new long-term fixed-rate mortgages to potential and actual home owners.

The economic lockdown that took increasing effect from March has changed the figures on which those plans were based. New mortgage applications, which has been running between SR20 million ($5.3 million) to SR50 million per week, dropped into single-digit millions as potential buyers were forced to stay at home rather than go viewing properties and took stock of their spending plans in light of the economic downturn that followed the pandemic outbreak.

“We expect to report a sharp drop for April and May. I would be surprised if the numbers remain the same,” Susini said. “But the fundamentals remain the same. It is still an underserved market, compared with the demands and needs of the young, dynamic population aspiring to home ownership. The process may be slowed by a couple of months, but the demographic is still there. There will be a slowdown but I’m sure a catch-up is coming and the forward movement will resume.”

One reason for his optimism is the action taken by the financial authorities to support the economy in its hour of need, especially the stimulus packages unveiled by the Saudi Arabian Monetary Authority (SAMA) and the Finance Ministry.

“There has been a lot of support coming through for small to medium businesses and private companies, and that will balance and smooth out the process. I don’t see a big hit coming,” he said.

Effective monitoring and control of SAMA liquidity injections would ensure they reached the SME and private sector organizations they are mainly intended to help, he added.

“I’d be very surprised if any significant proportion was not properly channeled to the private sector and SMEs,” he said.


BIO

BORN: Rome, 1964

EDUCATION: 

  • Law degree, Paris X Nanterre University, France
  • Banking and finance degree, Sciences Po, Paris
  • Master’s degree, finance, Dauphine University, Paris
  • MBA, London Business School

CAREER

  • Relationship manager, Societe Generale
  • Analyst, Bayerische Landesbank
  • Global head of securitization, BNP
  • CEO, Saudi Real Estate Refinance Company

The mortgage industry in Saudi Arabia enjoys significant subsidies from the government for its products, and while some of these have been changed in recent week, reducing subsidies to mortgages for military and some civilian personnel, he does not see this as the beginning of a trend to remove subsidies for mortgages in the broader scope of SRC’s business.

“There is no danger to mortgage subsidies that I am aware of. The budget has been carried out, the resources are there. But of course we want to make sure that every riyal of subsidy is used to its most effective extent,” Susini said.

“When we saw the situation was becoming more challenging, the SAMA package was a great help by injecting liquidity into the financial system, but we also wanted to be more proactive ourselves in the relationship we have with our borrowers and our partners. We didn’t just want to wait until people were actually in difficulties before we acted,” he added.

The result was the “forbearance” plan for borrowers, by which SRC asked its mortgage partners to offer a three-month mortgage holiday to those who felt the need, and many took up the offer. “A big majority has gone for it. We see ourselves as a ‘citizen’ company and we do not just want to rely on the authorities. We asked ourselves what we can do in terms of citizenship and public policy initiatives,” Susini said.

There seems little prospect of a cascade of mortgage defaults as long as the current policy of government support continues, and SRC and mortgage originators persist with the policy of showing patience and understanding in difficult economic circumstances.

Nonetheless, prospective home owners are facing big challenges. Not only has the lockdown made the market mechanics of home-buying more difficult, with viewings almost impossible in the light of curfews and travel restrictions, but there is also the question of whether people will hesitate over such a life-changing decision. Will they want to buy a house or apartment while the pandemic continues to rage?

Susini thinks customers will learn to prioritize their financial decisions more carefully. “You might defer the purchase of a new car, but still want to buy a home. You would direct your choice toward those things you regard as more important. Home ownership is probably regarded as more essential,” he said.

The appetite of Saudi citizens for house purchase in the new circumstances will be better judged when SAMA and other financial bodies publish official figures in the near future, he said.

With regard to the overall health of the real estate market, Susini said that he has not seen a significant fall in property prices, but underlines the fact that SRC caters mainly for the affordable segment of the market, where big falls in value are less likely. He noted that apartments have been holding their value “quite well” in comparison with bigger units like townhouses and villas.

In an era when global interest rates are falling toward zero in many parts of the world, there could be an incentive for customers to go for the long-term fixed-rate deals SRC is offering.

“We’re seeing the need for more awareness of the benefits of fixed rates. Borrowers can grasp the benefit of remortgaging at rates that are significantly lower now than they were before. It is a choice for the borrower really. They can either own their home more quickly than before, or maintain their payments on more sensible terms. It can be beneficial for them whether rates are subsidized or not,” he said.

SRC reduced its lending rates for long-term fixed mortgages last month, is first cut this year following two rate reductions in 2019. Borrowers could now take advantage of a 5 percent rate on a 25-year mortgage, Susini said.

SRC is also working hard on the digital space, with online facilitators becoming more crucial to home purchase. The company is in the early stages of a study on fintech and digital mortgage origination, and some initiative could be forthcoming by the summer, he said.

“If you can talk of a silver lining from the current situation, it is that it is accelerating the digitization of financial processes. The payment processes are already quite well developed, but the sale of processes presents more of a challenge. The health ministry has organized some innovative processes around the digital market place, and the justice ministry has done good work on the digital origination of contracts.”

The strategy of including mortgage originators in the SRC set-up will continue, and Susini is holding talks with financial and corporate firms to bring more products under its portfolio. 

SRC is owned by the Public Investment Fund, the Kingdom’s $325 billion sovereign wealth fund, so it has access to finance at the highest level. But under Susini’s stewardship there has also been a willingness to raise money in local markets via domestic sukuk issues. Two have already been launched, and a third is lined up to take place in the summer.

After that, the company will be work on an international bond offering toward the end of the year, though he declined to say how much would be raised.

“We want to ensure we can continue to finance mortgages, to have sufficient tools and channels so that no bank or finance company is stopped from offering mortgages because of issues to do with capital ratios of liquidity,” Susini said.

He viewed recent downgrades by ratings agencies of banks’ creditworthiness or prospects as a “gray cloud” over liquidity.

“We want to be ready so that primary originators of mortgages have all the tools necessary to keep operating regardless of the problems they might face,” he added.