The retail crisis looks set to continue in the new decade as estimates of store closures and lost jobs will increase in comparison to 2019.
The Centre for Retail Research predicts 171,669 job losses in 2020 (an increase of 19.8 percent) and 17,565 store closures (an increase of 9.3 percent).
The Centre for Retail Research has been analysing, evaluating and forecasting retail trends for more than 21 years and on Monday released its latest report called Retailing in Crisis 2019-2020. The findings highlight the issues facing retailers in the digital age, caused by a weakening consumer demand, high business rates and operational costs and the growth of online retailing.
Throughout 2019, news of retailers entering administration, store closures, re-structuring companies and businesses going insolvent were weekly, if not daily, headlines. Many well-known high street brands, once the backbone of the UK’s towns and cities, went into administration, think Debenhams, Mothercare, Bonmarché, Select, Karen Millen and Coast.
The bain of business rates
The Centre for Retail Research states 25 percent of all business rates are paid by UK businesses, with PWC noting business rates represent 42 percent of all taxes paid by largel retail companies.
To put that into perspective, the business rates paid by Selfridges for its flagship store is 17.5 million pounds, a figure 60 percent higher than Amazon pays for all its warehouses. Yet Amazon is now one of the largest retailers in the UK. Arcadia’s property at 214 Oxford Street has seen its rates on a single shop more than double from 1.48 million pounds to 3.84 million pounds this year.
Bricks-and-mortar retailers pay an average of 2.3 percent of their retail sales in business rates, online retailers only pay 0.6 percent. The report stresses the need for fairness and equal treatment of retailers of all different kinds by the tax systems means that the government must find a method of taxing retailers that does not favour online retailers at the cost of Britain’s high streets.
The Centre for Retail Research suggests a combination of halving the business rate burden on retailers and charging a higher VAT rate on online traders (say 22.5 percent) as a stop-gap on the lines of proposals first made by the OECD. This is not about whether online retailing is good or bad – obviously online has been of tremendous benefit to consumers – but now all retailers need to be treated equally rather than as cash cows.
Outlook for 2020 Retailing
The Centre for Retail Research expects the challenges facing retailers to continue in 2020 with more job losses and more store closures. The commercial pressures of higher labour costs, business rates and relatively weak demand will continue to undercut profits and force the weakest companies to close stores or enter administration. The high street and suburbs will continue to decline.
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