Next six months make or break for UK businesses

Despite a slowdown in the decline of stores across the UK one expert has warned that those still operating are far from out of the woods as the impact of COVID continues.

Research by PwC compiled by the Local Data Company (LDC) reported a net decline of 5,251 operators in the first six months of 2021 The figures saw the number of store closures fall faster than the number of openings, but the pressure is still on the high street.

Over 8,700 chain stores disappeared from Great Britain’s retail locations in the first six months of 2021. In total, 3,488 shops opened, compared to 8,739 closures, creating the net decline of 5,251.

However, there was some reprieve for both retailers and leisure operators, with the number of closures falling faster than the number of openings. As a result, the overall net closure rate is 750 lower than it was at the same point last year, despite some high profile administrations of high street fashion and department stores in early 2021.

Government support, in particular extended furlough and business rates relief until June 2021, have enabled operators to stay in business, said PwC. Whilst a rent moratorium has prevented landlords from evicting operators due to non-payment of rent or arrears. These measures have allowed stores to continue trading even where sites have been particularly hard hit by successive lockdowns. Meanwhile, as spending intentions return to pre-pandemic levels, pent-up demand as lockdown measures eased has converted into better-than-expected retail sales in the first full months of trading.

Lisa Hooker consumer markets lead at PwC said: “After an acceleration in store closures last year coupled with last minute Christmas tier restrictions and lockdowns extending into 2021, we might have expected a higher number of store closures this year. Government support has proved to be the lifeline for many to weather the storm and survive the pandemic. The fate of many operators has also been helped by resilience in consumer spending, including investment in the home through lockdown and using enforced lockdowns savings for ‘revenge spending’ when possible.

“However, operators are far from out of the woods and the next six months will be a make or break for many chains, particularly with the reinstatement of full business rates for all but the smallest operators, the winding-down of furlough support and agreement yet to be reached between many operators and landlords on rent arrears. There is also continued uncertainty for hospitality businesses who will be apprehensive of further restrictions on operating and the possible requirement for vaccine passports later in the year.

“But the good news is that there are some green shoots of optimism. Consumers still want a physical shopping experience and a number of chain stores and restaurants are opening. There is opportunity for operators who can be nimble, taking advantage of the current situation to either open new stores or to move stores to better locations.”

Hooker added: “In the uncertain times ahead it’s likely that not all shopping locations will survive in the same form, so investors will be considering how to repurpose the spaces to ensure profitability. Showcasing independent and local operators rather than the chains that are retreating could attract more footfall. On the other hand, converting for alternative use, whether housing, offices or civic services could be on the cards. The current overcapacity of retail space needs to be addressed and effective changes will require the cooperation of government, landlords and operators.”

Lucy Stainton, commercial director at The Local Data Company added: “As we move through the second half of 2021, we can now start to truly assess whether the market is entering into a ‘recovery phase’ following wave after wave of restrictions to retail and hospitality trade, designed to suppress the spread of the coronavirus. Despite LDC’s latest research showing that total vacancy across GB had reached an all-time high of 14.5% at the end of H1 2021, there are promising signs that the speed of the decline we were tracking across the worst of the pandemic is slowing. Our latest research on behalf of PwC points to a gentler net decline and pockets of resilience in key sectors such as fast food take away and convenience stores. Beyond this, we have witnessed the independent retail market returning to modest growth as consumers were motivated to support local businesses.

“That being said, the compound impact of multiple lockdowns can’t be ignored and whilst a slowdown in store closures is certainly welcome and a positive sign, the volume of empty units across GB is at a record high with no sign that the demand will ever be there to meet the supply. In fact, the data for H1 2021 indicates that openings were at the lowest they have been for 6 years. I fervently believe that there is still appetite for retail and leisure provision away from online, especially for occupiers that innovate in order to retain consumer interest long-term. However, the key to protecting our retail destinations will be for landlords, councils and place makers to proactively consider surplus space and how they can redevelop property for other uses outside of retail.”

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