The Crisis in Retailing: Closures and Job Losses

Business Rates, Online Competitors, Coronavirus and other misfortunes:

Permanent Crisis. Retailing in most of the Western World has been in crisis for more than ten years. This followed rapid debt-fuelled expansion of shops in the 2000s that pushed up rents in city centres to astronomical levels. This came to an end in the financial crisis of 2008, which led to the collapse of many retailers and store closures. The most famous business failure was Woolworths.

The New Consumer. What followed were changes in consumer behaviours. The challenges to living standards led to more 'shopping around' by consumers and the resurrection of value as part of the purpose of consumption. Even well-off people started boasting about Aldi prices and how good Primark was. In order to regain profitability, many retailers cut staffing and other costs and closed their branches in smaller towns and less prosperous suburbs.

Spending on Leisure Undercutting Retail Sales. Added to the problems caused by over-expansion, high operating costs and compeition from online sellers, retailers were also suffering because they were losing their share of consumer spending. Money that would otherwise be spent in shops was going on meals out, short breaks, gym membership, foreign holidays and spa, health and wellbeing treatments. Although foreign tourists were visiting Britain in the 2010s, their numbers and spending levels were far below what UK residents spent when holidaying abroad.

We published a report in 2014, Retail Futures 2018, arguing that the growth in online retailing and changing consumer demand would lead to one in five UK stores closing in the next five years. In fact it took only 5 years, 6 months for this to happen.

Irresistable Growth of Online Retailing. The growth in online retailing was faster in the UK than any other country. By 2006 the online share of retailing was 6.6%. In 2013 it was 12.7% and 19.2% in 2019. This growth in online market share mainly came at the expense of physical shops. They lost 12.6% od their market in the years 2006-2019. However most physical stores also got into online trading, enabling customers to buy online or phone up and collect instore or have the goods delivered. Ten years ago the online operations of John Lewis Partnership (JLP), now John Lewis and Partners, were equivalent to a large department store. By 2021, more than one-half of JLP's business is done online. Even this employee-owned business has had to dispose of part of its portfolio of stores.

The Pandemic. The Coronavirus pandemic has accelerated the trends in shopping behavious that were already there. In most countries, including the UK, households were advised to 'work from home', non-essential shops were closed for long periods, and shopping in the remaining stores and malls was made unpleasant. Hygiene and social-distancing rules and the frequent closure or restrictions of hospitality (pubs, coffee bars, restaurants etc) made a day out shopping impossible for part of the year and an obstacle course even when shops were open. Working from home also meant, of course, that employees could no longer 'pop in' to nearby shops or buy goods on their way to or from work. Total sales in London's Oxford Street fell from the usual £10bn pa to £2bn in 2020.

As though this was not bad enough already, each nation became preoccupied with offical death, hospitalisation and infection figures, the necessity of adherence to ever-changing covid regulations and the regular demands for even greater Lockdowns made many people greatly fearful of even passing another person on the pavement. Visiting a shop for some people was tantamount to suicide.

Not only have Coronavirus and government attempts to curb it been a hammer blow against the retail sector during the pandemic, but major parts of the sector will probably remain significantly disadvantaged because consumers are unlikely to revert fully to their pre-pandemic behaviour. This means that footfall in the high street will take some years before the (already weak) numbers normal in 2019 are achieved.

Our figures for store closures and job losses in retailing for the years 2018-2021, updated when possible during 2022, can be found below.

Business Rates. Business rates are a regular property tax paid by business. They are based on hypothetical rental values. As much as one-quarter of the entire business rates total now comes from the retail sector. Rents paid by shops have been declining as stores close and new occupants become difficult to find. The decline in rents has not led to a fall in business rates. Even those whose sales have risen (especially supermarkets) have faced sharply-increased costs from complying with the new regulations to protect the public and their staff. Online retailers of course pay business rates at the reduced levels applicable to warehouses. A satisfactory future for high streets will only occur if online retailers pay the same rates as store-based retailers

The Main Impacts

This page provides data on retail job losses and store closures month-by-month this year. It provides comparative figures for 2018-2021. The year 2020 was probably the worst year for retailers for 25 years. These are analysed, based on whether retail companies have gone into administration, agreed CVAs or they have rationalised their operations to meet reduced or changing demand. The figures relate to large and medium-sized retailers (five stores or more) and to independents (fewer than five stores, mostly one or two).

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

Table 1

Outcomes for 2022

Retailing 2022 (to end-May)	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	440	440
multiples: stores closed	34		770	804
multiples: jobs lost`	742		14,154	14,896
self-employed/concessions in larger shops	69		420	489
independent store closures	132		165	297
independent job losses	1,022		1,424	2,446
Total Job losses	1,833		16,438	18,271
Total store closures	166		935	1,101.

* based on our current information.

Table 2

Outcomes for 2021 (Updated March 2022)

Retailing 2021 (full year)	Administ-ration	CVAs	Rational-isation	Totals
specific redundancies & rationalisation	NA	NA	9,118	9,118
multiples: stores closed	1,251	324	942	2,517
multiples: jobs lost`	24,179	2,851	40,843	67,873
self-employed/concessions in larger shops	3,873	107	3,982	7,962
independent store closures	3,760		5,041	8,801
independent job losses	11,882		14,019	25,901
Total Job losses	39,934	2,958	62,835	105,727
Total store closures	5,011	324	6,124	11,459

* based on our current information.

Table 3

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 4

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 5

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?

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