From June 15, “non-essential” shops forced into lockdown are due to start reopening on English high streets. A sizeable minority, however — no one knows how many — will never awake from hibernation. Retailers have made less noise than airlines or some manufacturers about coronavirus. Yet while it has boosted the grocery trade and cycle shops, the pandemic’s impact will be severe on other parts of the industry that is the UK’s largest private-sector employer — and on the fabric of towns and cities.
Unlike some sectors that were previously thriving, non-food retailers were fragile before the virus struck. Christmas sales had been the worst for years; many store chains were battered again by February’s storms and floods. The arrival of spring stock offered a chance to turn the page, but much never made it into stores before lockdown; some is still sitting in dockside containers.
For years before that, Britain’s bricks-and-mortar retailers — some of which engaged in debt-fuelled overexpansion — had been squeezed between relentlessly rising rents, business rates and minimum wage rates, and the rise of online retail that sucked sales out of their stores. Multinational online-only retailers such as Amazon not only have lower property costs but can domicile businesses in low-tax jurisdictions.
The pandemic brought a suffocating cash squeeze on retailers that had to close shop doors — crushing revenues while many costs continued, even if the government’s furlough scheme and a one-year business rate holiday have helped. Conversely, the lockdown has given a hefty boost to online retailing; in terms of reshaping consumer habits, it has achieved in weeks what might otherwise have taken years.
So Covid-19 will accelerate and deepen both the shifts in shopping and the Darwinian fight for survival on the high street that were already under way. Only chains with the strongest balance sheets and most compelling retail formulas will survive. The lockdown has already claimed the high street stores of fashion retailers Oasis and Warehouse, and Cath Kidston; Debenhams is restructuring in an insolvency process. Others will certainly follow.
All chains will be reviewing how many stores they really need. Retail experts at KPMG previously expected high street retail space to shrink by 25 per cent by 2025, but now see that happening by 2022-23. Online retailing, they believe, could reach 50 per cent of the UK total by 2025 — five years earlier than previously anticipated.
With cafés and bars also facing a struggle to survive, the holes left on the high street will have social and political consequences. Even as they browse their smartphones, Britons tell pollsters they care about local town centres. Research has found that a sense of decay, felt particularly in high streets, fed into the 2016 Brexit vote. Post-virus, that will pose a particular problem for a government that pledged to “level up” less well-off regions.
Some of the regeneration must be led locally, but local authorities will need the resources to do it. Some things can only be done at national level. A years-overdue rethink of business rates has — perhaps unavoidably — been postponed for another year, but this outdated system is crying out for reform. A way must be found, too, to tax online retailers fairly, and to distribute some of the proceeds at local level to supplement the diminished local business tax base. The relationship between retailers and property owners needs comprehensive reform. These are only first steps. But they are vital if streets emptied by the pandemic are not to be left with much longer-lasting scars.
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