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UK high street - what can be done to stop its decline?

Jeremy Oddie, corporate recovery and insolvency partner at Mitchell Charlesworth, comments on the challenges faced by the retail sector.

The retail industry is a key contributor to the UK’s economic growth but it is facing numerous challenges with a string of well known high street retailers overcome by financial difficulties. Homebase, House of Fraser, New Look and Marks and Spencer, to name but a few, have all announced store closures in recent months resulting in thousands of job losses. Most recently Poundworld, the discount goods retailer, went into administration in June and Debenhams issued its third profit warning this year despite implementing a turnaround strategy aimed at cutting costs and boosting sales.

The wide variety of retailers struggling demonstrates that the issues impacting high street retail aren’t limited to a particular activity or strata but the whole buying spectrum is feeling the effect and retailers in urban areas need to completely review and change their retail offering.

A decline in shopper numbers, the impact of higher wage costs as a result of the national living wage and apprenticeship levy, a hike in business rates, upward only rent reviews, higher costs caused by a weaker pound and fierce competition from online retailers have all combined to make life hard for high street retailers, putting increased pressure onto costs and profit margins. Customers’ changing approach to shopping is also causing problems for many big retailers. Customers are not only buying more online but they are also looking for other attractions and experiences to combine with a high street shopping trip, such as eating out or a trip to the cinema.

Retailers need to keep up with the transition of shoppers turning their attentions to the internet. We are seeing some good online models from high street retailers who entice shoppers with free delivery and next day click and collect services. Customer service is also very important if retailers are going to maintain customer loyalty and support.

They also need to come up with innovative ways in which to deliver an exciting and wide-ranging customer experience on the high street.

For example, we are seeing collaborations between retailers and restaurants attracting customers who not only want to shop, but eat and drink at the same venue. House of Fraser in Manchester is home to San Carlo Cicchetti and the Patisserie Valerie chain can be found at Debenhams stores across the UK.

Giving customers choice is also vital. Shopping complexes like Liverpool One or the Trafford Centre have a wide range of dedicated food outlets to choose from as well as the opportunity to catch the latest film releases after visitors have shopped and eaten.

As department stores and large retailers shut down landlords have to find alternative uses for empty buildings. This creates opportunities for local independent operators to open new outlets and move away from the traditional format to pop-up shops, event spaces and market-style food outlets. However, more needs to be done to improve and enhance town centres and high streets and reverse the trend of falling footfall.

A simplified rates system will be introduced in 2022 but for many retailers this will be too late. Local authorities can rerate down at their own discretion but we are not seeing this happen.

There is currently a strong focus on trying to repopulate city centres with many new homes being built and communities developed. However, the continued process of large scale retail failure will impact on city centres and what is trying to be achieved. If the situation carries on and we see the end of city centre retail, it will no doubt have a negative impact on city centre communities.

It is also important to consider the profound human impact of the closure of retail stores across the UK. Thousands of employees are losing their jobs, and most of those jobs belong to women. Traditionally the retail sector was seen as a provider of flexible, part-time jobs for women looking to balance work with family commitments. More recently, the sector has also become a significant employer of the UK’s ageing population. The loss of sales assistant jobs means there are a huge number of people with a particular set of skills and expertise who need to be reemployed, but where to?

The success of online retailers has resulted in new jobs being created in shipping, handling, back office administration and warehousing but these require a different skill set and tend to be based on industrial estates, making them harder to get to, especially if a person is dependent on public transport.

According to the Department for Business, Energy and Industrial Strategy, in 2016 the retail sector added a gross value of £94.6 billion to the UK economy. Despite being one of the largest employers in the UK, retail has not historically been seen as an industry. As the issues affecting the high street bring about rapid structural changes to the way retail operates, there needs to be a shift in how the sector is viewed. It would be good to see central and local government recognise retail as an industry which provides jobs, service and revenue and work closely with retailers and landlords to help it evolve.

The launch of the Retail Sector Council, a collaborative approach by government and industry to look at how best to ensure the industry adapts to meet the changing demands of consumers is a good start.

For further information please contact Jeremy Oddie below:

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Strength in Numbers Autumn 2018
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