March 7, 2021

Why Ecommerce is damaging the Scottish economy

Dr Peter Mowforth

People in Scotland are just as likely to do their shopping online as are people from other parts of the UK. While high-street shops such as NEXT saw traditional sales down 9.2% over the Christmas period, the company was saved by it’s online performance growing at a steady 15.2%. Others, such as HMV, with weaker online performance, went into administration.Recent figures show that over 85,000 high-street retail jobs have been lost over the past few months as shoppers look online to find better prices and convenience. These weaknesses are translating into bankruptcy for both individuals and companies.While the Scottish Government estimates that ecommerce in Scotland generates £26.4 billion in online sales, the Government is unable to answer how much of that accrued to sales from Scottish businesses. While there remain no official statistics, I suspect that it would be hard to identify anything over £2 billion across the whole of Scotland. If this is correct, the result is a significant e-trade-deficit where we export jobs, local taxes, wealth and business infrastructure to those places that fuel the ecommerce supply chain.One significant consequence of this e-trade-deficit is a lower revenue stream for local Government in Scotland. Rates revenue from a diminished high-street will reduce while support for those who have lost their jobs may need to increase. This lack of supply-side activity in ecommerce is now one of the major factors in Scotland’s relatively poor performance compared to the rest of the UK.Interestingly, a major focus for the Scottish public sector organisations is productivity. Although ecommerce can be viewed as ‘productivity for sales’, the subject is yet to feature on any productivity agenda.

The Manchester example

Manchester lies to the North of the English Midlands. It is just one region in the world that has placed ecommerce at the centre of their plans for economic revival and development. Key to their plan involves a massive extension at Manchester airport. This has been robustly supported by local business groups.

The Hut Group is a UK ecommerce business specialising in the health and beauty market. Around half their turnover involves online export of British-branded products to China. They are just one example of a local business that is investing heavily in business infrastructure. In November 2018 The Hut Group announced a $1 Billion development involving their new ecommerce campus at Manchester airport. Just this single company campus will support 10,000 jobs on a 16.8 acre site. They are also pressing ahead with their ICON project, an ecommerce content creation studio on an adjacent 11.6 acre site.Manchester also boasts a strong ecommerce services supply community as well as strong support from local skills organisations, clubs and a major annual event.

Summary and the way ahead

Given the UK Government’s ONS statistic that UK e-commerce is now worth over £560 billion and that web based ecommerce is growing at around 21% a year, there should be no further need to explain or justify why Scotland needs to seriously focus on boosting its supply-side ecommerce. Until that happens, the changing way that individuals and businesses buy their products and services is now one of the most pernicious factors impacting the Scottish economy.If we are to turn a negative into a positive we need to move swiftly with a plan. The approach taken by Manchester is a great example that combines business incentives with infrastructure, community clubs, a rich provision of skills and educational support and a flagship annual event. Business knows what needs to be done. We simply need the political vision and will to make it happen.

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