Music stops for HMV: The pressure mounts for crackdown on internet rival Amazon
- Store calls in KPMG as administrator after a catastrophic Christmas
- This puts 2,200 jobs at risk and is second time in six years HMV has collapsed
- It follows years of competition from Amazon and other online retailers
Music chain HMV has become the latest casualty of the crisis on the High Street as shoppers abandon stores to go online.
The near 150-year-old chain has called in KPMG as administrator after a catastrophic Christmas.
It puts 2,200 jobs at risk and follows years of relentless competition from Amazon and other online retailers.
HMV has had to contend with Amazon and other online retailers for many years over sales
And it has triggered fresh demands for radical reforms forcing huge foreign internet companies to pay their fair share of tax.
Critics argue the playing field is not level, with traditional shops forced to pay massive business rates bills and corporation taxes.
Meanwhile, online players typically have warehouses where rates are lower, and use legal loopholes to slash corporation tax.
According to property adviser Altus Group, HMV paid £800 per square metre in rates at its store in Stockport this year – 18 times as much as Amazon for its warehouse in Airport City, Manchester, nine miles away, where it paid £44 a square metre.
HMV’s annual rates bill is more than £15million, and costs for its flagship Oxford Street store rose by more than two-thirds to £1.3million.
Its chairman Paul McGowan said: ‘HMV has clearly not been insulated from the general malaise of the High Street and has suffered the same challenges with business rates and other policies which have led to increased fixed costs.
‘Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the past 12 months on top of such a dramatic change in consumer behaviour in the entertainment market.
‘Unfortunately, the switch to digital has accelerated dramatically this year, creating a void we are no longer able to bridge.’
HMV was founded in the 1890’s but is set to call in administrators for second time in 6 years
Wes Streeting, Labour MP and member of the Treasury committee, said: ‘If you look at the burden of taxation on both businesses it’s heavily skewed toward HMV and biased against physical retailers, and I think that is really hammering the High Street.
‘The measure that the Government has introduced to increase tax on digital companies and retailers is a drop in the ocean when you look at their turnover and profits.’
The Treasury has been criticised for failing to support the High Street, with 93,000 retail jobs disappearing this year. It is slashing rates for small businesses but campaigners fear this will not go far enough.
Labour MP Peter Kyle, another member of the Treasury committee, said: ‘Every area of retail has been impacted by internet sales but HMV is absolutely central to the onslaught of the internet.
‘What it does show is that other companies will get caught up in this if we don’t act quickly. We need some sort of cross-party commission to address the issue. Retail needs stability, and if we’re not careful it will become politicised.’
It is the second time HMV, which traces its roots back to the 1890s, has collapsed in six years.
Turnaround specialist Hilco Capital bought it for £50million in 2013 after it crashed into administration.
Despite saving more than 2,000 jobs and returning to profitability, HMV has struggled to survive the rapid rise in online music and movie services.
Sales of DVDs across the retail sector slumped by 30 per cent over the Christmas period and are expected to decline another 17 per cent during 2019, HMV said.
Streeting added: ‘The Government needs to take urgent action and seriously reform the whole range of business taxation to reduce the burden on retailers. But it should also ask those online retailers which are booming to pay their fair share.’
Amazon has always insisted that it pays its fair share of business rates however it has refused to disclose the exact amount it pays.