The UK Retail Sector

Even before the disruption caused by the Coronavirus Pandemic, the UK’s retail sector had its difficulties. To quote from the House of Commons’ Briefing Paper entitled ‘Retail Sector in the UK’ and dated 25 May 2021 (‘the Briefing Paper’), “The retail sector is going through a prolonged period of upheaval. Factors such as changing consumer behaviour, increased internet shopping and challenging economic conditions are changing the way retailers operate and engage with their customers.”

We looked at the question of company voluntary arrangements (‘CVAs’) in September 2019 as the case concerning the voted for rent reductions for the failing Debenhams stores hit the legal headlines. It is not just the retailers themselves who are facing difficult times but their landlords, too. To quote again from the Briefing Paper “In 2020, 54 retail companies with multiple stores ceased trading, affecting 5,214 stores and 109,407 jobs according to the Centre for Retail Research”. This reportedly has led to 15% of retail premises standing empty in the second half of 2020.

The Pandemic gave rise to different difficulties. Even in the essential stores allowed to open, mostly food stores, social distancing and coronavirus security measures gave rise to increased costs (some of which were met by government support measures). For non-essential retailers, purchases from stores were brought to a halt and many will find that the consequential on-line purchases will continue to take over in the future. The Briefing Paper states “Non-store sales increased rapidly at the onset of the pandemic and have remained high ever since: as of April 2021, non-store sales were 53% above pre-pandemic levels.”

Other factors, too, are affecting the retail sector. Disposable income “has barely grown” reports the Briefing Paper. “Between 1955 and 2007, the average annual growth in real disposable household income per head was 2.6% a year. Between 2008 and 2011 disposable income fell to 0.2%. Between 2012 and 2020 growth in income recovered but at a slower rate (1.4% average annual growth).” Additionally, retailers themselves are offering alternative services to shopping in-store e.g. ‘click and collect’ and “The growth of online retail following the pandemic is forcing retailers to reconsider the value and purpose of their physical stores even further”. The Briefing Paper offers no solutions but certainly gives rise to food for thought.

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