The Crisis in Retailing: Closures and Job Losses

Coronavirus: 

The effect of the coronavirus lockdowns and the various Tier restrictions in England and other parts of the UK have come  on top of retail's existing problems. It has been a hammer blow against the sector, which has particularly disadvantaged most non-food stores. Shopping in high streets and malls has become less pleasant. Hygiene and social-distancing rules and the frequent closure or restriction upon hospitality have made a day out shopping impossible for part of the year and an obstacle course even when shops are open. 

The first half of 2021 looks much like 2020, only worse. We expect there to be 200,000 job losses in the sector and a lot more bad news about corporate failures. 

Our figures for store closures and job losses in retailing for the years 2018-2020 and the monthly figures for 2021 can be found lower down on this webpage.

Retailing is in crisis. This has been caused by high costs, low profitability, and losing sales to online shopping.  These problems did not start with coronavirus, but the responses to the pandemic in the form of a combination of government restrictions plus changes in the shopping behaviours of the public, have adverseley affected most businesses operating from physical stores in high streets, shopping malls or neighbourhoods. 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. The low growth in consumer spending since 2015 has also meant that the growth in online sales comes at the expense of the high street.

The Main Impacts

Attitudes vary about whether this crisis represents simply a change in how we shop or a dangerous trend that will vitiate our town centres, high streets and deplete our social space. We are certainly experiencing a major strategic change in the retail industry, concentrating five-year's change into eighteen months.

This page provides data on retail job losses and store closures month-bby-month this year. It provides comparative figures for 2020 (probably the worst year for retailers for 25 years) and 2018 and 2019. 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).


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?


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