Sales recovering but the highest vacancies ever seen – Retail facing an uncertain summer
But in many ways, despite lockdowns being lifted and restrictions easing across England, Scotland, Northern Ireland and Wales, this is exactly what’s happened.
Since the Covid-19 lockdowns began the Insolvency Service has been providing monthly figures on the number of businesses that have undergone an insolvency procedure such as administration, company voluntary arrangements (CVAs) or liquidations.
For retailers the figures are sobering.
Since May 2019, 1,316 retailers have entered insolvency. This is a rate of 110 a month or more than four a week.
This is with the restrictions on creditors’ recovery actions such as statutory demands and winding up petitions that are due to be lifted at the end of September at the same time that all other Covid-19 support ends including the furlough scheme.
Earlier this year we investigated how much bounce back loan borrowing had been done by businesses in each industrial sector and found that retail businesses had collectively borrowed the most.
216,718 loans were granted to retailers while the scheme was still running for a combined total of £7.7 billion which is an average of £35,530 per retail borrower.
This is the equivalent of building a new Wembley Stadium and still having £1.6 billion in change left over.
We also looked at the estimated rate of defaults and even under the best case scenarios we modeled – 15% of loans remaining unpaid – this would still be £1.16 billion missing from the public purse.
Against this backdrop, sales are beginning to rise with annual sales growth for July for the sector standing at 6.4% although this is steady rather than spectacular as the three-month average was 14.7%.
Any positive news in the sector should be cheered at the moment as it finds itself fighting to reestablish itself on many different fronts.
Another worrying statistic to illustrate this came this week with new research published by the British Retail Consortium and the Local Data Company (LDC).
It shows that more than one in seven shops are now vacant across the country – including high streets, retail parks and in shopping centres – the highest levels since 2015 and the highest ever recorded by the LDC.
Indoor shopping malls now have a vacancy rate of 20% too, underlining how the enforced change in shopping habits over the past 18 months along with high profile brands such as Debenhams and the Arcadia Group which owned Topshop, Miss Selfridge and Dorothy Perkins, went into insolvency and liquidation after selling these brands to new operators where they became online-only.
Regionally, the North East of England had the highest overall proportion of empty shops at just over a fifth and saw the biggest increase in vacancies during the last 12 months.
Greater London proved the most resilient with a rate of 10%.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium said: “The retail vacancy rate is continuing to rise.
“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment. Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital offering.
“The Government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels. Retailers want to play their part in building back a better future for local communities, and the government must give them tools to do so.
“The vacancy rate could rise further now the Covid-19 business rates holiday has come to an end. The longer the current system persists, the more job losses and vacant shops we will see.
“July continued to see strong sales, although growth has started to slow.
“The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations. Online sales remained strong, and with weddings and other social events back on for the summer calendar, formalwear and beauty all began to see notable improvement, so fashion outlets in particular saw a bounce back to pre-pandemic levels.
“As many people prepare to return to the workplace, purchase of home office equipment began to fall after months of high sales, meanwhile other homeware, such as furniture and household appliances continued to do well.”
The government is planning to publish a review of business rates in the Autumn after retailers were given a holiday from the tax throughout the pandemic. This tax break began to unwind last month and will end for all businesses in March 2022.
Lucy Stainton, Commercial Director for the Local Data Company added: “After an initial flurry of CVAs and closures due to consumer behaviour shifts and cost-cutting exercises, retailers are now starting to dust themselves off with cautious optimism, keeping an eye on the rapidly changing infection rate and the pace at which vaccinations are taking place; two measures that could seriously derail the recovery efforts should they not go in the right direction.”
Retailers expecting a fantastic sales surge will have been disappointed this summer season.
Several will have invested a lot into their businesses ahead of an expected grand reopening and if they metaphorically put their foot on the gas – they’ve got a whimper instead of a roar.
Sadly for them and every other firm struggling with their bottom lines right now – bills and debts continue to arrive even if the expected sales haven’t.
With the last of the Covid-19 support measures being withdrawn in the next few weeks and creditor actions being reinstated at the same time, it could be a sharp and uncomfortable Autumn for a lot of otherwise profitable businesses.
Because time is running out, we’ll get straight to the point – get in touch with us today.
We won’t waste your time with fancy theories or upselling you services you don’t need. We’ll use your free initial consultation to find out precisely what you’re up against, then come up with some timely and effective solutions you can start to put into practice straight away.
Things are going to get more uncomfortable for a lot of retailers before the year is out so by using the time you have now to arrange a restructuring and rescue strategy or other methods depending on your goals, you can spend it doing more important things – making more money.