The retail sector has been going through a tough patch of late. In fact, the phrase ‘tough patch’ is probably underselling the issue somewhat.
Just last month, Philip Green, the long-time retail mogul, announced plans to close 23 stores and slash around 520 jobs as part of a plan to save Arcadia Group, while clothing giant Forever 21 has declared that it is to look into ‘extensive restructuring’ in a bid to keep the brand afloat.
The twin issues of uncertainty around Brexit and the increase in people heading online to purchase goods has left the high street in a state of near turmoil, and latest figures around spending are not going to make for happy reading for retailers.
A sharp decline
According to the latest research carried out by KPMG, UK retailers saw the biggest decline on record with regard to retail sales. The study concluded that sales dropped 2.7% in May, while like-for-like sales actually fared even worse, dipping by 3%. And, though those numbers may not sound particularly large, they could potentially spell disaster for companies already balancing on a precarious financial tightrope.
These losses will have set alarm bells ringing in all retail quarters, and could potentially result in store closures and wide-scale job losses. However, given that the consequences of an outright retail collapse would likely spell catastrophe for the UK economy, government, local authorities and retailers alike are urgently considering options to keep disaster at bay.
With sales declining, businesses are looking for ways that they can remain alive without having to close stores. And, for many observers, the obvious answer would be to reduce business rates. In fact, there have been calls from senior political figures – namely West Midlands Mayor Andy Street – for business rates to be altered so as to save the high street.
Street has called for a ‘radical shakeup’ of business rates legislation, claiming that high street stores are burdened ‘disproportionately’ compared to online retailers. He also went as far as to suggest that new and expanding businesses should be privy to drastically reduced rates, while public sector operations – namely the NHS and sixth form colleges – should be given 100% relief.
Street also slammed the work of Chancellor of the Exchequer Phillip Hammond, calling his recently-introduced measures around business rates ‘unsustainable’.
As has been the case for a couple of years now, we must play something of a waiting game. May’s retail results could turn out to have been an anomaly, which would certainly be the best case scenario. However, what is perhaps more likely is that they are indicative of a much wider and more significant problem. Unfortunately, the potential consequences of this will not be known until we have more comprehensive data, and by then it could be too late to save the high street.