Who’d be a retailer?
2022 was yet another difficult year for the country’s retail sector, seeing more shops shutting down than any other in the last five years, with similar challenges expected for the upcoming year according to industry groups.
New figures show that footfall on Britain’s high streets and shopping centres plunged by more than a quarter in the week after Christmas compared with one week before.
Many shoppers have opted to stay at home rather than brave the weather and the sales, as last week footfall was 27.7% lower than the week before and 19.7% down on the same week in 2019, data from retail analysts Springboard revealed.
It was only 7.2% higher than the same week in 2021, when shoppers stayed away from high streets due to fear of the new Omicron variant of Covid-19.
Retail experts said one key reason for this difference was that this year Christmas Day fell on a Sunday when footfall is typically at its lowest of the week anyway, while the year before it had begun on Boxing Day.
Boxing Day 2022 was better than 2021 with an increase in footfall of 38.8% on 2021 but this had reduced by New Year’s Eve to only 1.9% higher.
Even slightly rising footfall has not been enough to offset the pace of store closures in the UK as they accelerated in 2022 following the withdrawal of Covid-era support measures.
Research conducted by the Centre of Retail Research (CRR) indicated that ongoing rationalisation of property was the main reason for branches closing rather than outright insolvency.
On average, 47 shops closed every day of last year – a total of 17,145 for the whole of 2022.
This was an increase of 50% on the 11,449 shops that closed in the pandemic affected 2021.
The CRR also found that 151,474 retail jobs across the UK were lost in 2022, including those from online retailers. This was up 43% on the 105,727 positions lost in the previous year.
Further analysis revealed that 5,509 stores closed because retailers underwent an insolvency event while 11,636 were closed as part of larger cost cutting measures by larger retailers or independents closing their doors for good.
The number of store closures undergone by large chains with ten or more outlets, reduced by 56% mainly because the worst performing brands had already collapsed in the previous couple of years.
The biggest names affected include the retailer McColl’s and lifestyle brand Joules. Both companies were eventually taken over by but 19 Joules stores closed as part of the administration process and the new owners of McColl’s announced plans that would see more than 100 outlets closed.
Professor Joshua Bamfield, director of the CRR, said he expected the rationalisation trend to continue into 2023 as it seemed to be “the main driver for closures as retailers continue to reduce their cost base at pace”.
During the coronavirus pandemic and subsequent lockdowns retailers received extensive support including access to bounce back loans, the furlough scheme that allowed them to retain staff, the ability to delay value added tax payments and exemptions from business rates.
Support was gradually withdrawn throughout the year with a business rates cap being introduced that drastically reduced the value to larger retailers. This had a knock on effect with general rising costs like many other sectors have found including energy prices and supply chain issues.
Retail sales grew by 2.3% over the year although once record high inflation of over 10% is taken into account then sales volumes declined for both food and non-food items.
Looking ahead, sales are forecast to grow by between 2.3% and 3.5% this year overall with the assumption that inflation will reduce and consumer confidence will improve.
Kris Hamer, director of insight with the British Retail Consortium (BRC), said: “The first half of the year is likely to be challenging for households and retailers.
“Ongoing inflation will make sales appear to be rising but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs as this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5 billion as the government’s energy bill relief scheme comes to an end in March, putting further ongoing upwards pressure on prices.
“There is cause for optimism in the second half of 2023 when we expect inflation to ease and if consumer confidence improves then this will result in an improvement in both sales growth and corresponding volumes.”
Retailers have had as tough a few years as anybody working in the sector can remember.
If the market recovers then they could still be in for a rough few months to experience it, even if they can navigate the treacherous waters of Winter and Spring first.
Fortunately we are in a position to help them find some support – just in time!
Once they have a clearer understanding of the unique situation facing your business, then they will be able to furnish you with a range of options you can take advantage of, probably more than you originally thought you would have.
There is usually more room to manoeuvre the earlier in the process they get in touch with us but only if they take the most important step and make contact.