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How the high street has changed in the last five years – and why 2018 looks set to be the worst year for retail in a decade

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The Centre for Retail Research says 10,000 more stores will close this year
The Centre for Retail Research says 10,000 more stores will close this year
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How the high street has changed in the last five years – and why 2018 looks set to be the worst year for retail in a decade

Five years ago the Centre for Retail Research predicted that by 2018 one in five stores that were then open would by now have closed. Now the CRR has updated that report in Retail at Bay 2018. How have its forecasts stood the test of time? We take a look at the findings.

 

Retail is having a bad year in 2018

The CRR says that 2018 will probably prove to be “the worst year for bad retail news since the recession in 2008," which is when Woolworths collapsed. It points to 18 large and medium-sized retailers, including Toys R Us and Maplin, going bust in the 100 days of this year, with the loss of 13,500 jobs. For context, that’s more than in the whole of 2017. Six retailers are using CVAs to close 286 stores, putting 6,000 employees at risk, while last week saw the Homebase group, which employs 11,500 people, sold for £1 to its management. Still more retailers, such as M&S, are announcing store closures. In all the CRR expects around 10,000 stores to close in 2018.

 

Since 2008, says the report, 409 large and medium sized retailers have gone into administration, affecting 23,378 stores and 280,425 employees.

 

Death of the high street?

The death of the high street has been forecast since online retailing first started to take off, and such predictions have become more common over the last 10 years. So has the high street collapsed? The CRR estimates that around 10,000 stores will close this year, taking the total number of stores in the UK to more than 317,462. That’s 18.4%, or 71,602, less than the 389,064 that were open in 2012. “This,” says the CRR report, “is admittedly slightly lower than the proportionate drop we projected long ago in 2013 but by 2019 the forecast should come right.” By contrast, in 1950 there were 600,000 or so stores open, though that figure has stood at around 400,000 since around 1978.

 

It also cites figures from the Local Data Company that show store vacancy rates have run at 11.9% for some time, improved from 14.3% in 2011. More prosperous areas of the country, such as the South East and Greater London have lower vacancy rates, at around 7%, while less prosperous areas such as the North West and North East have rates closer to 15%. Business rates have

 

Many stores have been replaced by restaurants, coffee shops, hairdressers and others over the last few years. But, says the CRR, where high streets were responsible for 50% of retail spending in 2000, today they are responsible for 36.6%.

 

The role of online retailing

In 2018 the CRR says online retailing will reach 17.8% of the market - or around £61.4bn in sales. It predicts it will take 6.3% of the food and grocery market, and 26% of non-food sales. “As more than a quarter of non-food sales will be in the hands of online sellers that means many non-food shops, from music to shoe shops to department stores are not needed any more,” says the report.

 

By 2022 it expects online sellers to take 22.7% of retail sales, including a third (33.9%) of non-food, with dramatic effects on store numbers, which it expects to reduce by a further 31,005, producing 384,500 job losses as a result. That would represent an overall fall in store numbers of 23.6% since 2012.

 

What needs to happen?

“We feel there is a danger that, left to itself, with no government actions and no extra funding and zero action on business rates there will be an overreaction to current problems,” concludes the report, “excessive store closures and too many high streets abandoned.”

 

The report suggests:

  • rethinking business rates and introducing a new turnover tax that would affect both online and offline retailers equally. Currently, it says, traditional stores will pay an expected £7.2bn in business rates in 2018/19, while online retailers will pay £457m.
  • Developing strategies to help high streets in areas that are facing the greatest decline.
  • Setting up a £450m pump priming fund to support high street re-engineering, encouraging property companies and councils to rethink town centres through micro-projects, house building and provision of other services.

 

To get a copy of the full Retail at Bay 2018 report, email [email protected] with the subject heading Retail at Bay 2018.

 

Image: Fotolia

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