Social costs and Tesco’s retreat

Five years ago, all the talk was of Tesco’s advances, both in the UK and US. There was plenty of opposition to Tesco, and when the former boss Terry Leahy stepped down there was more scope for reflection on the impact of the retailing giant.The last few years have been much harder for the business, so I read with interest another type of Tesco article, in which communities reflect on the impact of Tesco closures. This looks to be another example of the potential external costs of business activity.

For instance, it seems remarkable that the forthcoming closure of Tesco in Kirkaldy has prompted statements like that made by Council leader, David Ross, who said to the BBC : "Today's rally is about speaking up for the vulnerable members of the community who really don't want to see it close. Tesco Kirkcaldy is more than just a town centre supermarket - for them it's a lifeline. He added: "What really concerns me is that if we create a hole in the high street by losing the biggest superstore in the town then all the other shops in the area will suffer."

To be fair, this was a point made by the critics of Tesco’s expansion, who worried that it would leave many towns hostage to the fortunes of one big retailer. Shutting the Kirkcaldy store would also mean the closure of the town's post office, which is based within the supermarket.

Some shoppers will find themselves marooned, according to one former Tesco strategy consultant. "It's customers in smaller towns. Particularly if you are not mobile, if you don't own a car, if you are elderly, less affluent, deprived."

According to another article (with some good photos) "If you went back five years when they were announcing they were opening new stores, everyone was up in arms saying it's going to hurt the town," said the director of The Local Data Company. Now council leaders in areas affected by closures are asking: "What am I going to do?"

For many local authorities, the era of Tesco expansion was an opportunity to secure Section 106 agreements - deals between a developer and council, which, in return for planning permission, can help fund affordable housing, roads and schools. The problem now is that many of the Tesco developments on which town hall leaders had staked regeneration plans have been cancelled.

Dartford in Kent is a good example. Rows of empty, crumbling shops along a once-bustling street sit boarded up. This was supposed to be a vast 24-hour supermarket, surrounded by hundreds of new homes. Tesco's scheme was first proposed in 2002. Early plans were rejected in 2006. After years of wrangling, permission to build a 100,000 sq ft supermarket and flats was granted in November 2011. The plans were scaled back. Finally, demolition work began. Soon after came the announcement that Tesco wouldn't be opening here after all.

"Before, it was fantastic," says the owner of a second-hand shop that is one of the few remaining businesses still trading on this side of the road. "It was a thriving little community, really good little independent shops. We just sit here looking at the door now. We are sitting here doing nothing all day."

It’s a thought provoking issue, which isn’t intended to be an attack on a particular company, but a reflection on some of the wider external costs of business activity.