The retail industry in Britain had a “brutal” year in 2018, with more stores closing than at any other time in the previous five years. Industry groups predict that 2023 will be just as difficult.
According to research from the Centre for Retail Research, on average, 47 stores closed their doors for the last time each day last year (CRR). 17,145 shops on high streets and in other places were discovered to be permanently closed in 2022. This is an increase of nearly 50% over the 11,449 stores shut down in 2021 due to the Covid pandemic.
The CRR also reported that, including those from online retailers, 151,474 retail jobs across the UK were lost in 2022, a 43% increase from the 105,727 jobs lost the year before.
History Behind the Scenes
It was discovered that 11,636 stores were closed as a result of cost-cutting initiatives by large retailers or independent retailers closing their doors permanently, while 5,509 stores were shut down as a result of retailers going out of business or entering some other form of insolvency.
However, because the majority of the underperforming stores had already failed in prior years, the number of store closures brought on by large chains—those with 10 or more outlets—was down by 56%. In 2022, several retailers went out of business, including McColl’s convenience store chain and the Joules clothing chain. In the end, Next and the founder of Joules worked together to rescue the company from administration, and Morrisons acquired McColl’s; however, both transactions resulted in the closure of stores and the loss of jobs.
Director of the CRR Prof. Joshua Bamfield stated that “rationalization now seems to be the main driver for closures, rather than company failure, as retailers continue to reduce their cost base at pace.” In 2023, he predicts that this trend will continue, but he also noted that “a few big hitters may well fail, too.”
According to the study, independent businesses closed 11,090 stores last year, compared to 6,055 stores closed by big box stores. Retailers and landlords are expected to pay close to £1.1 billion in business rates for vacant sites starting on April 1 over the upcoming tax year, according to property advisor Altus Group.
“Rate-free periods need to be urgently extended to reflect the time that it takes to re-let vacant properties,” said Robert Hayton, the UK president of Altus Group. Empty rates are ready for modernization because of the difficulties the retail sector is currently experiencing due to the conflict in Ukraine.
Sales volumes were down compared to 2021, according to the British Retail Consortium, making 2022 “an exceptionally difficult year for both consumers and retailers.”
The war in Ukraine accelerated inflation at a time when many costs were already rising due to supply chain issues, with energy and food prices rising by more than 10% year over year during the second half of 2022, according to the industry body.
Retail sales grew 2.3% during this period as the cost-of-living crisis unfolded. However, when inflation is taken into account, sales volumes declined for food and non-food items.
Sales are expected to grow between 2.3% and 3.5% this year, picking up in the second half (to between 3.6% and 4.7% from 1% to 2.3% in the first half), assuming inflation slows and consumer confidence improves.
Words of Expert
Kris Hamer, the BRC’s director of insight, said: “The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5bn as the government’s energy bill relief scheme comes to an end in March, putting ongoing upwards pressure on prices.
There is a reason for hope for the second half of 2023 when we anticipate lower inflation and rising consumer confidence to boost sales growth and corresponding volumes.