UK retail sector faces fight to recover from coronavirus crisis<\/p>\n<\/p>\n
Several well-known brands including Cath Kidston, Laura Ashley, Oasis and Warehouse have all collapsed<\/a> since the virus forced UK retailers to shutter stores.\u00a0<\/p>\n Shoe retailer Aldo was the latest to call in the administrators this week, and retail and restructuring specialists believe many more companies, and even the landlords who let their properties<\/a>, will struggle to navigate the waters ahead.<\/p>\n \u201cThe high street wasn’t quite meeting the challenge of a changing customer base before the global pandemic, so efforts will be needed to be doubled now,\u201d said Rick Smith, managing director of business rescue and insolvency experts, Forbes Burton. \u201cMany names have vanished in the past decade and a lot of recognisably successful chains teeter as they have done for several years.\u201d\u00a0<\/p>\n He said a large-scale recovery is unlikely \u201cdue to restrictions on opening, customer confidence and general frugality following a period of disquiet\u201d.<\/p>\n Some of the UK\u2019s largest retail complexes have reported significantly reduced incomes over the lockdown period. British Land has written down the value of its retail portfolio by more than a quarter, and the share price of shopping centre owner Intu has fallen by almost 90% in the last year. Intu told investors this week it expected rent collection to fall by \u00a3181m.<\/p>\n \u201cThe government\u2019s plan to get retail and leisure operators back up and running poses a significant challenge,\u201d said Liz Cotton, partner at TLT law firm. \u201cHow can these businesses trade successfully whilst observing social distancing, safeguarding the health and safety of staff and visitors and protecting themselves against health and safety and employment law risks?\u201d\u00a0<\/p>\n Outdoor markets and car showrooms could open from 1 June, while high street shops and shopping centres will be able to reopen from 13 June only if they can adequately manage the risks. It is likely to involve a significant spend to refit many locations out, alongside investment in health and safety equipment, hand sanitizers, and even more staff to police the stores.<\/p>\n \u201cOperators have a moral and legal obligation to keep staff and other people entering their premises safe from harm, and Covid-19 is a risk like nothing we have ever seen before,\u201d Cotton said.<\/p>\n Given the limitations on customer numbers, and lingering anxiety about using public transport or congregating in crowds, some brands will have to restructure and rearrange business models to have any chance of survival, experts said.<\/p>\n “Customers may naturally be reluctant to return to the high street when they are unsure of their own safety,\u201d Smith said. \u201cIt is also likely that supply chains may be disrupted for several months and so deliveries, stocks and general business operation may prove difficult as demand grows to pre-lockdown levels.\u201d\u00a0<\/p>\n Companies must look at several elements of their operations, he said, and consider pivoting to online or takeaway models, or even exiting markets entirely.<\/p>\n “Retailers will definitely need to reassess their locations too, is the high street or shopping centre really the best place for them right now?\u201d he said. \u201cOnline sales may account for 20% of sales in total, but as technology has had to be adopted during recent measures, that will likely only rise.\u201d<\/p>\n Research by Sage found the severe financial challenges are projected to continue for small and medium businesses (SMB) well into Q3 2020.\u00a0<\/p>\n Sage\u2019s quarterly survey of 500 SMBs revealed 61% are currently operating at a loss, and over 50% expect this to continue beyond the end of June. It reported sales at 39% of businesses have halved since the beginning of the pandemic, and most do not expect this to improve by July.\u00a0<\/p>\n Despite the support provided by the government\u2019s furlough scheme, 46% of businesses are considering redundancies over the next three months, Sage said.\u00a0<\/p>\n \u201cThe outlook remains deeply concerning as we look towards Q3 and the relaxing of lockdown, with financial challenges continuing to bite for many,\u201d said Sabby Gill, managing director of UK and Ireland at Sage.<\/p>\n There is also a significant and growing divide between the sectors as the crisis continues, he said. \u201cAs the retail and hospitality industries remain at a standstill, the financial fortunes of these businesses are diverging even further from those of the average SMB. They will also face a whole different set of operational challenges.\u201d\u00a0<\/p>\n \u201cThere is little doubt about the fall from grace of retail property companies,\u201d said Professor Adrian Palmer of Henley Business School. \u201cIt is not just high streets that have been suffering, but the owners of the biggest out-of-town shopping centres have seen the value of their property valuations and share prices tumble.\u201d\u00a0\u00a0<\/p>\n These trends were well-established pre-Covid-19, Professor Palmer said, as online shopping grew its share from about 7% to 17% by value of all retail expenditure between 2010 and 2019, according to the Office for National Statistics.\u00a0<\/p>\nThe battle ahead<\/h3>\n
Business confidence<\/h3>\n
Pre-pandemic trends<\/h3>\n