What’s ahead for the retail sector in 2019? – February sector focus

retail vanishing from high streets?It has been obvious for some time that the High Street is undergoing massive changes as online shopping gains a growing share of the retail pie.

Not a week goes by without another announcement of a “big name” closure or restructure and the New Year has been no different after mediocre Christmas sales with Hardy Amies and HMV falling into administration for a second time, Patisserie Valerie and Odd Bins filing for insolvency and Marks & Spencer announcing further store closures as part of its ongoing restructuring.

The figures make gloomy reading.

Deloitte says it has been instructed by more than 20 struggling high street chains in the past two months to assess whether they are eligible for restructuring their debts and lease obligations, according to the Sunday Times.

Towards the end of January the Guardian carried out a survey of the decimation that has beset High Streets in 88 major town centres in England and Wales and found that they have lost 8% of their shops on average since 2013.

Some have fared worse than others with Stoke on Trent topping the list with a loss of 23% of its 415 stores in five years.

Clothing and restaurant chains have fared worst, according to the research, but, surprisingly perhaps, charity shops have also been hit.

By contrast it also revealed that “a thousand extra hair and beauty salons have sprung up in our town centres”. Also, convenience stores and independent supermarkets have also grown in almost all town centres.

The stresses and strains on the retail sector

In common with other businesses, but arguably having more impact on SMEs, retail has had to contend with rising minimum wages and pension contributions for staff.

But added pressure has come from the high cost of rent and of town centre business rates, both of which the online retailers escape. Online retail now accounts for 20% of consumer retail spending, which adds to the pressure on High Street retailers as consumer buying habits change. This 20% figure when compared with 8% of shop closures would suggest there are many more closures to come.

At the moment, there are signs that worry about the future of jobs and the unknown impact of Brexit is currently putting a dampener on consumer spending and confidence.

Is there any light in 2019 at the end of the High Street retail tunnel?

Certainly, the Sports Direct owner Mike Ashley seems to think so, as do some others.

HMV has just been purchased by a Canadian business, Sunrise Records, although 27 stores will be closed as part of the deal.

Mike Ashley has purchased a share in House of Fraser stores and Evans Cycles to add to his growing portfolio and has recently had some success in renegotiating rents with landlords in some shopping centres, saving some House of Fraser stores that had been under threat. He is also laying siege on Debenhams hoping to pick up another High Street trophy.

Ashley has been vocal in calling for a complete rethink on business rates and for a 20% sales tax to be imposed on online retailers which would help justify his acquisition strategy.

Sir John Timpson has also called for business rates to be replaced with a sales tax operating in a similar way to VAT.

The MP Grant Shapps has also called for radical action to save the High Street, including a reduction in business rates with which he claims the government has so far only “tinkered” with.

These calls have also been backed by Mike Cherry, chairman of the FSB (Federation of Small Businesses), adding “A healthy high street should be diverse – not just featuring retail but also hospitality, services like hairdressers as well as gyms and shared workspaces for the self-employed. High parking charges and a lack of spaces often put off shoppers from visiting town centres, instead favouring out-of-town retail parks with free parking.”.

To add weight to their argument the OECD (Organisation for Economic Co-operation and Development) has said Britain has the second-highest property taxes in the world with business rates, council taxes and stamp duty making up £1 of every £8 collected by the Treasury.

In a sign of some movement in December it was announced that Nicky Morgan MP, chair of the Commons Treasury Select Committee, will hold a joint evidence session with the Housing, Communities and Local Government Committee to agree the terms of a new inquiry into the business rates system.

The death of the High Street has been predicted for some years but there are signs that some people feel there is life there yet, subject to some radical rethinking and tax reform.

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