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British High Streets Unable to Weather Storm

A shocking report compiled for PwC has shown that 85,000 retail jobs have been lost this year, with a staggering 14 store closures per day in H1 2018.

The report published by PwC and compiled by The Local Data Company tracked 66,961 outlets operated by multi-outlet retailers in 500 town centres across Great Britain between January 1st of June 30th of this year.

Making for grim reading for those in the retail industry, the retail sector as a whole continues to struggle to deal with the rise in online shopping and the ever-growing shift to in-home leisure amongst consumers.

According to data in the report, a net of 1,123 stores “disappeared” from Great Britain’s high streets in the first half of this year; only 1,569 shops opened, compared to 2,692 closures within the same period – These results are a world away from 2017’s H1 results which showed a net loss of just 222 stores.

Lisa Hooker, consumer markets leader at PwC, said: “Our latest research highlights the challenges facing the retail and leisure sectors on Britain’s high streets. The continued rate of store closures reflects the new reality that many of us prefer to shop online and increasingly eat, drink and entertain at home. The high street is adapting to overcapacity in retail and leisure space resulting from these channel shifts.

“Openings simply aren’t replacing the closures at a fast enough rate. Specifically, the openings across ‘experiential’ chains, such as ice cream parlours, beauty salons and vape shops, haven’t been enough to offset closures in the more traditional categories.

“Looking ahead, the turmoil facing the sector is unlikely to abate. Store closures already announced in the second half of the year due to administrations and CVAs already will further intensify the situation.

“The British high street is in urgent need of new ways of thinking and new forms of retail. Encouraging this should be a priority, and it remains to be seen if recent packages of support for the high street and reductions in business rates for smaller retailers will be sufficient to stimulate this.”

High street closures occurred more commonly in categories affected by online shopping (eg, fashion & electrical outlets) as well as restaurants and pubs, which were affected by the growing consumer preference for in-home leisure, preferring to eat & drink at home.

The report shows that restaurant and entertainment chains saw a net loss of 340 stores, a stark contrast to H1 2016 & 2017 which saw rises in both years.

 

 

Top risers and fallers by business type in H1 2018

 

Risers Fallers
Net Change (Units) No. of openings No. of closures Net Change (Units) No. of openings No. of closures
Supermarkets 8 14 6 Fashion Shops -104 165 269
Booksellers 8 18 10 Public Houses & Inns -99 71 170
Ice Cream Parlours 8 16 8 Electrical Goods -44 8 52
Stationers 6 15 9 Restaurant – Italian -44 6 50
Coffee Shops 6 60 54 Charity Shops -37 80 117

 

(Source: Local Data Company)

 

Lucy Stainton, Senior Relationship Manager (Retail) at The Local Data Company, said: “The performance of the physical UK retail landscape has well and truly passed an inflexion point. While there are still many examples of sectors and brands which remain resilient to market challenges, it would be remiss not to acknowledge the increase in store closures, seen especially in the first half of 2018 when the gap between openings and closures has widened significantly.

“Retailers and leisure operators alike are frantically trying to adjust their business models and concepts to meet evolving consumer habits. Arguably in part, these latest figures reflect both; businesses which have struggled to meet consumer demand, but also conversely those operators who are actively managing and reducing their portfolios to ensure their estate remains fit for purpose.”
 

 

Openings & Closures of multi-outlet retailers across GB

 

Region Number of store openings Number of store closures H1 2018 (net change) H1 2017 (net change)
East Midlands 113 239 -126 8
East of England 155 217 -62 -34
Greater London 448 716 -268 -23
East Midlands 113 239 -126 8
North East 42 114 -72 -11
North West 134 192 -58 -10
Scotland 58 107 -49 -42
South East 230 427 -197 -25
South West 127 190 -63 -33
Wales 30 52 -22 -11
West Midlands 134 223 -89 -33
Yorkshire and the Humber 98 215 -117 12
Total 1,569 2,692 -1,123 -22

 

(Source: Local Data Company)

As the above table shows, Greater London saw the largest number of net closures across all regions, with leisure accounting for nearly half of the capitals closures in H1. Wales was the best performing region, seeing the lowest overall net decrease with just 22 (net) stores closed.

In addition to the retail and leisure sectors, many traditional ‘store-based’ service businesses such as estate agents, recruitment agencies and even banks have continued to thrive online. Whilst thee industries have seen a slower rate fo closures, it’s clear from the recent news that internet bank Monzo-which recently welcomed its millionth customer,- that ‘always online’ is the endgame for retail going forward.

PWC’s Retail Restructuring Partner, Zelf Hussain, said: “The transformation of the UK high street – both physical and virtual – raises questions about how legacy retailers and leisure operators should restructure and what new investment is needed. However, the intensity of the current climate means those questions often require immediate answers.

“The number of distressed businesses in 2018 has led to a spike in company voluntary arrangements. We believe that CVAs can be helpful restructuring tools, but alone are insufficient. Our own research of more than 101,710 companies listed on Company House shows that of the 65 retailers entering into a CVA between 1987 and 2017 more than half (51%) failed, leading to another insolvency process.

“With the impact of some recently announced CVAs yet to feed through, alongside the peak time period for new CVA announcements being the first quarter of the New Year, we should brace for more high street closures in the coming months.”

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