Retailers call for action as high street store closures soar | Business

Retailers call for action as high street store closures soar | Business

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Retailers and unions are calling for urgent government action to help struggling high streets as new data shows the number of shops, pubs and restaurants lying empty is rising at the fastest pace in nearly a decade.

About 16 stores closed their doors every day in the first half of 2019 while only nine opened, resulting in a net decline of 1,234 chain stores on Britain’s top 500 high streets according to analysis by PricewaterhouseCoopers (PwC) and high street analysts the Local Data Company (LDC).

The decline, which does not include independent shops, was faster than the net 1,123 closures during the same period last year – after just 222 in 2017 – and is the highest recorded since LDC began monitoring high streets in 2010.

The shop closure data reflects a crisis on the high street that has cost tens of thousands of jobs. The retail industry employed 57,000 less people in the three months to the end of August compared to the same period a year before, according to new data from the Office for National Statistics (ONS) released on Tuesday. It was the fifth consecutive quarter of decline.

Major chains including Karen Millen, Jack Wills, Bathstore, Patisserie Valerie and Debenhams have gone into administration this year after the collapse of House of Fraser, Evans Cycles, Maplin and Poundworld in 2018. Some of those chains are still in business, taken over by new operators after their collapse, but have closed outlets.

Many other retailers, including Topshop owner Arcadia, Monsoon, New Look, Carpetright and Homebase have been forced to seek legal agreements with their landlords to shut stores and slash their rent bills to stave off insolvency.

“The government must address the growing crisis on our high streets,” said Paddy Lillis, general secretary of the shopworkers union Usdaw, which has launched a Save our Shops petition.

Usdaw, and some of the UK’s biggest retailers including Tesco and Sainsburys, have demanded a review of business rates and other taxes to ensure there is a level playing field with online rivals. Last month, more than 50 major UK retailers, ranging from Marks & Spencer to Harrods, Greggs and John Lewis wrote to chancellor Sajid Javid to demand an urgent review of business rates to safeguard the high street.

They pointed out that retailers account for around 5% of the British economy but pay about 10% of all business taxes and about 25% of business rates.

Usdaw also wants better support for communities and a minimum wage of £10 an hour to help protect 4.5m jobs in the retail sector.

The government recently increased its high street rescue fund by £325m to £1bn, promising to pump extra money into 100 towns including Blackpool, Scarborough and Clacton. It has also announced £900m in business rates relief for small retailers and a taskforce of experts to assist local authorities in developing “innovative strategies to help high streets evolve”.

But retailers say a complete overhaul of property taxes is required to help fend off competition from online-only operators such as Amazon and Asos.

What’s the problem?

Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. In 2018 Toys R Us, Maplin and Poundworld disappeared as a result.

In terms of habits, shoppers are switching to buying online. The likes of 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. 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. 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 after October 2019. 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 October 2018 budget the government announced some relief on business rates for independent shopkeepers. 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 2019?

Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the far east, have also added to costs and hit profits.

“High streets are undergoing a fundamental change in response to changing shopping habits, new technologies and rising costs of doing business, so it is vital that government supports the industry to make the necessary investment to adapt,” said Dr Liliana Danila, economist at the British Retail Consortium.

“The business rate system holds back investment, reduces productivity and increases regional disparities … The government must address the much-needed reforms to this broken tax system before more jobs are lost and stores are closed.”

Retail chains have been hit by a mix of low consumer confidence, which has cut spending, and rising costs from business rates, an increase in the legal minimum wage, and higher cost prices as a result of the decline in the value of the pound since the EU referendum.

The rise of online shopping and a shift in how consumers spend their leisure time – towards spending more of their spare cash on holidays and dining and drinking at home – have also hit high streets and shopping malls.

Fashion chains were hardest hit in the first six months of this year, with a net decline of 118 stores as chains such as New Look, LK Bennett, and Yorkshire-based menswear specialist Greenwoods either restructured or went bust, according to the PwC/LDC study.

Restaurants, estate agents, pubs and bars also registered substantial numbers of closures.

Wales was the hardest hit region, with a net 2.3% fall in store numbers – meaning one in every 44 stores in Wales closed its doors in the first half of this year. However, every region registered a decline in store numbers. The east of England, west and east Midlands, Yorkshire and the Humber all reported declines of more than 2%, while Greater London and south-west England were just under 2%.

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“There’s been no let-up in the changing ways that people shop and the cost pressures affecting high street operators,” said Lisa Hooker, consumer markets leader at PwC. “As consumers continue to change the way they shop and spend their leisure time, the reality is that we may need fewer high streets in the future.”

There are some high street success stories. Takeaways, health clubs, pet shops and discount stores are the fastest growing outlets.

A similar decline in store numbers is expected in the second half of 2019 as recently approved restructurign deals, including Topshop and Dorothy Perkins owner Arcadia, are implemented. Hooker said there could be greater stability next year “subject to world economics and politics.”

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