The UK is in a steep decline that has put many of its companies at risk. The unemployment rate remains at 4.4%, public debt has grown, while a report published this week showed that almost 3 million people fell into financial difficulty last year.
That report also showed that over 20.3 million people or 44% of the population was now living in financially vulnerable circumstances. Housing is no longer affordable while interest rates have remained at their highest level in over a decade.
The corporate sector is also at risk as most publicly traded companies are trading at a big discount to their American peers.
Boohoo (LON:) vs Aston Martin vs Burberry
Carpetright is about to collapse
Carpetright, a company with over 200 stores in the UK, is a good example of UK’s decline. It is on the verge of collapse, putting over 1,800 jobs at risk.
The management is now working to find external investments from wealthy individuals and private equity companies. As they do that, they have lined up PricewaterhouseCoopers to act as administrators if it fails to get this financing.
Carpetright has suffered from numerous issues. Most recently, it was affected by hackers who attacked its computers, leading to disruption in its operations. Sales have dropped while its debt load remains substantial.
Body Shop collapsed
Carpetright is not the only UK company that has come under pressure in the past few months. The Body Shop, once a popular UK retailer, moved into administration earlier this year, three months after being sold by Natura to Aurelius.
It has remained in administration since then and is now on sale again. According to the Telegraph, Mike Jatania, a wealthy retailer, is expected to make a bid for the company through a consortium.
The Body Shop has had a spectacular fall from grace over the years. In 2017, it was acquired by Natura from L’Oreal in a £1 billion deal. Natura then sold it in 2023 to Aurelius, a private equity company.
Boohoo shares have imploded
Publicly traded companies in the UK have remained under pressure even as the soared to a record high.
A good example of this is Boohoo, a well-known e-commerce company known for its eponymous brand. It also owns Karen Millen, PrettyLittleThing, and Debenhams, which it bought during its collapse.
Boohoo’s share price has imploded in the past few years, dealing a big blow to the UK hopes for a popular e-commerce brand. It has dropped by over 91% from its lowest point in 2020 as its sales growth have slowed.
In contrast, other European fast fashion brands like H&M and Inditex (BME:) are doing fairly well. Similarly, Shein, a Chinese brand, has become a multi-billion dollar behemoth.
McLaren, Burberry, and Aston Martin
UK’s luxury brand companies are also in trouble. Burberry’s share price has dropped by over 63% from its highest point in 2023 and was trading at its lowest point in years. In comparison, other European luxury companies like Hermes, LVMH (EPA:), and Dior are doing modestly well as they attract more demand from luxury buyers.
Meanwhile, the UK no longer has a big share in the global luxury auto market. Lotus, one of the country’s best-known brands, is now a Chinese company. Aston Martin’s share price has imploded while Ferrari (NYSE:) has become a $70 billion behemoth.
The company has struggled because of its substantial debt load and supply chain issues. Similarly, McLaren, another popular brand has remained under intense pressure in the past few years and is now owned by Mumtalakat, the Bahrain state fund.
Jaguar Land Rover is now an Indian company, meaning that the UK has a small role in the automotive industry.
Labour government could make things worse
All these events have happened at a period when the UK was being led by Tories, which are seen as being more business-friendly.
Over the years, Tories have made things worse for the UK economy. They championed net zero policies that have decimated the country’s energy sector. They also introduced windfall taxes on the energy sector. Immigration increased, leading to a sharp jump in the UK’s house prices.
Regulations have increased over the years while Brexit has made it difficult for small British companies to thrive.
The Labour Party could make things worse for the British economy by raising taxes and burdening the country with more regulations. For example, the party has advocated increasing the energy windfall tax on energy companies, a move that will make it less attractive for investors.
It is also aiming to increase investments in clean energy in a goal to make the country a clean energy superpower, whatever that means. While good on paper, these plans will be expensive and probably make life more expensive for most residents.
The Labour Party has not created a good industrial policy that will make the UK a more competitive country. It also does not have a plan to cut taxes.
This article first appeared on Invezz.com
