Almost twice as many shops disappeared from UK high streets in the first half of 2020 than last year as a whole as the Covid-19 lockdowns hammered retail businesses.
A total of 11,120 chain store outlets closed between January and June, while 5,119 opened. The 6,001 net store closures was a record high, compared with 3,509 in the same period last year, in another blow to the UK’s struggling retail sector.
Analysts predict there will be many more closures to come as the data does not include outlets which were still temporarily closed under lockdown rules when analysts visited and which might end up permanently shuttered.
The figures, published by the Local Data Company and advisory firm PwC, show that more than 60 stores closed per day while 28 opened, in research that covered UK high streets, shopping centres and retail parks.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as unseasonable weather. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. They also want more political certainty as the potential for a no-deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs at the end of this year. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers.
What is the government doing?
In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
What is the outlook in 2020?
Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further potential Brexit wobbles to come – retailers are facing another tough year in 2020. The latest rise in the national minimum wage in April will also add to costs and hit profits. On the plus side, there are hopes of a boost to the housing market from increased certainty about Brexit after the general election. There are also signs that the shift to online shopping is slowing, potentially easing the pressure on high streets.
York was the worst affected, with 55 net shop closures in the first six months of the year, followed by Durham with 43 and Corby with 26.
The shop closure data reflects a crisis on the high street that has cost thousands of jobs as chains, led by already struggling fashion, mobile phone and betting shops, closed their doors. During the period, Carphone Warehouse closed all 531 standalone branches while fashion chains including Oasis, Warehouse and Cath Kidston all closed down. Major names including Marks & Spencer, Debenhams and House of Fraseralso closed stores.
Lucy Stainton, head of retail and strategic partnerships at the Local Data Company, said: “The results from the first half of 2020 are a stark reminder of the challenges faced by retailers in the first six months of the year, which included a national lockdown.”
She feared that this was the tip of the iceberg, with 22% of chain stores still closed temporarily
“With each week that passes since retail and hospitality businesses were given the green light to reopen, the likelihood of these occupiers ever trading again in those units reduces.”
She added that local lockdowns and other restrictions such as the 10pm curfew would continue to have “a devastating impact” on the sector with more closures likely after the key festive trading season ends.
The reports says: “Unless further government stimulus is announced, we’re guaranteed to see further closures” as a result of factors such as: further movement restrictions; the unwinding of the furlough scheme this month; and the end of business rates relief and VAT reductions for the hospitality sector in March.
The data does not cover independent stores which researchers said were likely to have seen a resurgence as more people worked from home and shopped locally during the pandemic. The report found that among the chains, takeaways and coffee shops were among the fastest-growing types of high street outlet.
In regional terms, Greater London saw the highest total number of net closures – 1,008 – followed by the south-east of England and the north-west. But Yorkshire and the Humber recorded the biggest loss of chain stores in percentage terms, with a net 3.4% of outlets disappearing compared with 2.2% in the east of England – the best performing region.
Shopping centres were the worst-affected location.
Lisa Hooker, consumer markets leader at PwC, said the pandemic had accelerated existing changes in shopping behaviour as it had “forced experimentation” during the lockdown.
“We all knew that consumers were shifting to shopping online or changing their priorities in terms of the things they buy, but what Covid-19 has done is create a step change in these underlying trends to where they have now become the new normal.
“We all still want and need to physically visit shops and leisure operators, it’s likely then that whatever happens retail will come out of this smaller but stronger,” she said.