Skip to main content

Warm weather, the World Cup and a royal wedding have lifted spirits across Britain this summer and given the economy a slight boost. But nothing has helped clear the gloom from the country’s retail sector, which is on track for its worst year ever and set to shed close to 70,000 jobs.

On Friday, one of the country’s biggest department-store chains, House of Fraser, filed for bankruptcy protection from creditors, threatening 16,000 jobs. The chain was bought within hours of filing for £90-million ($150.48-million), by British sporting-goods giant Sports Direct International PLC, which is expected to close dozens of outlets. The House of Fraser transaction came a day after hardware retailer Homebase announced plans to close 60 of its 249 stores, affecting 1,000 employees.

So far this year, nearly 2,000 stores have closed across Britain, putting 28,000 people out of work. That’s already the highest number of store closings in five years, and the total tally is expected to climb much higher, with analysts estimating another 40,000 jobs will be lost. More than a dozen high-profile names, including Mothercare, Maplin, Poundworld, Marks & Spencer, Toys "R" Us and Debenhams, have either filed for bankruptcy protection, shut outlets or drastically cut costs.

"This is a critical period for the retail industry, caused by a perfect storm of pressures including rising costs and new technology changing how people shop,” said Helen Dickinson, chief executive of the British Retail Consortium.

Sales by high-street merchants have been falling steadily for months as inflation creeps up, Brexit concerns rise and consumer confidence remains shaky. Inflation has reached 2.4 per cent, above the target of the Bank of England, and concerns the country could leave the European Union next year without a trade agreement, have raised concerns the economy could slow and decrease consumer spending.

Monthly tracking by consultants at the London office of BDO LLP shows that in-store sales fell 1.1 per cent in July, marking the sixth negative month in a row and the worst start to a year in more than a decade. Weak sales have persisted despite a slight pickup in the overall economy, which grew by 0.4 per cent in the second quarter compared with 0.2 per cent in the first three months of 2018. “The bleak and crippling start to the year shows no sign of abating, with deep discounting set to eat into margins that are already being stretched paper-thin by poor sales and rising costs,” BDO retail analyst Sophie Michael said in a recent report.

Richard Hyman, a London-based retail consultant, said the trend isn’t changing any time soon. “We are only at the beginning of the downturn,” he said in an interview on Friday. “There are too many websites, too many stores, too many retail companies, and a lot of them just aren’t good enough. They don’t understand their customers well enough and they are not good enough at inspiring people such that there’s a reason for them to visit their stores.”

Indeed, figures in a comprehensive study of Britain’s retail sector released last month by former retailing executive Bill Grimsey indicated that 6,000 more retailers will fail by 2020.

Mr. Grimsey and others point to a host of reasons for the decline, notably the move to online shopping which has hurt standalone stores. Internet sales as a proportion of retail sales have increased from 10.4 per cent in 2013 to 17.9 per cent in 2018 and the figure is expected to reach 30 per cent by 2025, according to Mr. Grimsey. And while Britain’s population has increased by 0.7 per cent annually, the number of people visiting high streets has fallen by 17 per cent in the past five years.

The result has been a transformation of many downtown areas. The number of shops opening in Britain has fallen by 11.4 per cent since 2013, while the store-closing rate has increased by 1.1 per cent, according to Mr. Grimsey’s report. Those stores have been replaced largely by restaurants and bars, as well as health and beauty shops. “The fundamental structure of Britain’s town centres has changed from goods transaction to one of consumption of food and experiential services including health and beauty,” the report said. It noted that only large shopping malls are showing a growth in sales, and that’s partly because they offer restaurants and entertainment along with shopping.

Mr. Grimsey made a series of recommendations to bring shoppers back downtown, including relatively simple changes such as increasing the amount of public WiFi, making parking easier through the use of apps and offering more space for cyclists and pedestrians. But Mr. Hyman said the sector is facing a long-term challenge. “This is structural,” he said. “What we’re seeing is the result of far too much [retail] supply and not enough demand. We’re in for a rough time I’m afraid.”

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe