High street shops closing at a rate of ’14 per day’ according to a new report released by accountancy specialist PwC and the Local Data Company. The report says high street shops are still facing testing times as new research shows the gap between closures and openings widens to a record level, but closures have stabilised.
Those most affected by online shopping like fashion and electrical stores are key drivers of net declines, as too are public houses & inns and Italian restaurants – both categories impacted by overcapacity and the trend we are seeing for consumer preference for in-home leisure. The net decline is not, however, unexpected, given heightened restructuring activity and continued digitisation of services. The shopper’s love affair with small indulgences continues as booksellers, ice cream parlours, stationers and coffee shops all showed a net growth in the first half of 2018 (net growth = Number of store openings minus the number of closures).
As store closures start to plateau, the net decline is driven by a reduction in store openings. The recent Budget announcement to reduce business rates for smaller retailers is designed to help reverse this decline.
Store closures have slightly increased against the equivalent period last year but it’s a significant fall in store openings driving overall net decline – a record level for the British high street:
- A net 1,123 stores disappeared from Britain’s top 500 high streets in the first half of the year compared with a 222 store loss over the equivalent period last year
- Daily store closure rates have plateaued though at 14 stores a day but store openings have fallen, with a 773 difference between store openings in H1 2017 and H1 2018.
Lisa Hooker, consumer markets leader at PwC, said “The continued rate of store closures reflects the new reality of that many of us prefer to shop online and increasingly eat, drink and entertain at home. The high street is adapting to an overcapacity in retail and leisure space resulting from these channel shifts. Openings simply aren’t replacing the closures at a fast enough rate. Specifically, the openings across ‘experiential’ chains, such as ice cream parlours, beauty salons and vape shops, haven’t been enough to offset closures in the more traditional categories.”
“Looking ahead, the turmoil facing the sector is unlikely to abate. Store closures in H2 (the second half of the year) due to administrations and CVAs (Company Voluntary Arrangements) already announced will further intensify the situation.”
Zelf Hussain, Restructuring Partner at PwC, said “The transformation of the UK high street raises questions on how legacy retailers and leisure operators should restructure and what new investment is needed. We believe that CVAs can be helpful restructuring tools, but alone are insufficient.”
Store category risers and fallers
- Store categories experiencing the greatest net growth tend to be small chains like booksellers, ice-cream parlours, stationers and coffee shops
- Supermarkets are also experiencing a net growth
- Conversely, overcapacity and a growing shopper preference for in-home leisure is demonstrated by the net loss of 340 restaurant, catering and entertainment outlets in H1 2018, a turnaround from two years of net rises. Other leisure categories were also affected with bars and bookmakers just missing the top five faller categories.
- The impact of CVAs and retail administrations has also introduced new categories to the fallers list. Electrical goods and Italian restaurants are particularly prominent.
- Many traditionally store-based service businesses, such as banks, estate agents, recruitment agencies and travel agents, have continued to move online, albeit with a slowing rate of closure<