The Crisis in Retailing: Closures and Job Losses

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Why Is It So Bad for Shop Retailers?

The reasons for the issues facing retailers with physical shops are discussed extensively in our report Retail At Bay. The key issues are as follows

• The high costs of running retail outlets, including rents, business rates and high labour costs;
• Low profitability caused by high costs, slow growth in sales, squeezed profit margins and heavy price competition;
• The rapid growth of online competition such that by 2018 online sales accounted for around 18.4% of total retail merchandise sales, with much of online growth achieved at the expense of bricks-and-mortar retailers.
• Lack of preparation: low investment in stores and weak forward planning to meet the challenges of the new retailing.  
• Coronavirus Lockdown. Trumping all the above have been the effects of the lockdowns and the Tiers, which have deprived the majority of stores of their normal revenues in Lockdown. Recently, the 'stop-start-stop' with lockdowns and Tier 4 imposed at short notice has brutally disadvantaged most non-food businesses. Online retailers have generally done well, but a large proportion of retail trade is lost forever during lockdowns and is not recovered when stores are open again.  Although a lot of money has been channelled into the retail sector 'to preserve jobs', businesses cannot operate with zero revenue and constant threats of pandemic-driven closure. 

Social distancing, the queues to enter stores, and the frequent requests to use hand santisers and 'not to touch merchandise unless you are going to buy it' robs the act of shopping of any pleasure, making it something hazardous. Similarly, the need for what is left of the leisure economy (tea shops, coffee shops, restaurants and public houses) to apply social distancing and high pandemic security makes relaxing over a coffee or a snack that much more fraught. 

Several important retailers have already gone bust. We expect more to do so, making 2020-2021 one of the worst periods for bricks-and-mortar retailing since the 1970s. Many companies in a better financial position with a substantial online offer as well as retail stores will not go bust, but have to rationalise their store portfolios. Moreover, the massive peak in online sales, whilst physical shops have been shuttered, presents greater problems for British high streets because many shoppers will not return. 

The retail crisis in jobs, businesses, stores and high streets has been coming for a long time. 

 

Here are further details about where the job losses and store closures have come from.

 

Table 1

Outcomes for 2021 (to end-May 2021). 

Retailing 2021 (to end-May)	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	3,236	3,236
multiples: stores closed	1,108		179	1,287
multiples: jobs lost`	17,432		10,594	28,026
self-employed/concessions in larger shops	2,482		435	2,917
independent store closures	380		680	1,060
independent job losses	2,280		2,720	5,000
Total Job losses	22,194	NA	11,029	33,223
Total store closures	1,488	NA	179	1,667

* Correct to 31 May 2021, based on our current information.

Data collection for Independent store closures and job losses is only partly completed (as at end-April).The information, above, represents data received so far.

 

Table 2

Outcomes for 2020 (to 31 December). 

Retailing 2020	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	14,755	14,755
multiples: stores closed	2041	533	2,975	5,549
multiples: jobs lost	53,364	11,496	44,521	109,381
self-employed/concessions in larger shops	8,715	490	8,240	17,445
independent store closures	4,189	-	6,307	10,496
independent job losses	12,286	-	28,697	40,983
Total Job losses	74,365	11,986	96,213	182,564
Total store closures	6,230	533	9,282	16,045

* Correct to 31 December 2020.

 

Table 3

Outcomes for 2019 (12 months)

Retailing 2019	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	9,593	9,593
multiples: stores closed	684	313	4,404	5,901
multiples: jobs lost	9,060	24,042	43,164	72,266
self-employed/concessions in larger shops	5,873	2,420	5,991	14,284
independent store closures	5,720	-	4,452	10,172
independent job losses	23,171	-	19,816	42,985
Total Job losses	38,103	26,462	78,563	143,128
Total store closures	6,404	313	9,356	16,073

 

Table 4

Outcomes for 2018 (12 months)

Retailing 2018	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	19,112	19,112
multiples: stores closed	1,631	272	1,400	3,303
multiples: jobs lost (store closure)	22,671	3,900	11,862	38,433
self-employed/concessions in larger shops	1,300	2,200	1,350	4,850
independent closures	9,820		1,460	11,280
independent job losses	48,314		6,716	55,030
Total job losses	72,285	6,100	39,040	117,425
Total store closures	11,451	272	2,860	14,583

 For more information or support about CVAs, talk to KSA Group (https://www.ksagroup.co.uk/)

Definitions

• Administration –administration is a form of insolvency giving a firm protection from its creditors and time to reform the business. It is similar to Chapter 11 of the U.S. Bankruptcy Code. On this webpage we only include actual job losses and actual store closures over the year following administration, although in our Who’s Gone Bust? we include the total jobs and stores at risk.
• CVAs – Company Voluntary Arrangements – a different form of insolvency intended normally to give a business time to prepare a recovery business plan, which needs the agreement of its creditors. The plans often involve store closures and job losses as part of relaunching the business.
• Rationalisation – our term for store closures or job losses occurring either as a regular aspect of business or a special cost-cutting programme. Retailers may close stores or warehouses, reorganise their management structure in stores or the head office or propose cuts in every department in order to reduce losses and cut costs, but where there is no recourse to administration or CVAs.
• Store – a special retail unit with a visible physical existence, whose size may vary from less than 1,000 square feet to more than 120,000 square feet. In English English ‘shop’ and ‘store’ mean the same although this is not true in North America and other continents.
• Job losses – these include announced reductions in a company’s labour force, both full-time and part-time. There is no assumption that such workers become permanently unemployed.
• Multiples – large retail businesses with ten or more stores.
• Medium-sized retailers – multiples with between five and 10 stores.
• Independents – mainly one-shop retailers but includes businesses with fewer than five stores.
• Online retailers – retail businesses that primarily trade online, although they may also operate a small number of stores.
• Pop-up stores – not included in this analysis.

The estimates on this page give job losses and store closures resulting from:

 We only include proposed closures and announced job losses. We do not include what the BBC calls jobs ‘at risk’ (ie companies or in administration) because there is a danger that this overstates losses in a normal year and we publish those figures anyway in Who’s Gone Bust?