Job losses in UK retail accelerate as costs mount
According to new figures from the British Retail Consortium, the number of full time jobs in the sector fell 3.9 % year-on-year last quarter
The recent losses add to the estimated 8000 jobs slashed in the final quarter of 2016, when the BRC’s figures showed the number of jobs fell by three per cent.
The first three months of the year have been particularly tough for UK retail, with several high street names falling into administration. Brantano and several of Poundland’s 99p Stores entered into administration, while Jones the Bootmaker was saved from failure by the private equity firm Endless.
And, experts have predicted many more recognisable retailers will be folding throughout the year. Jaeger, the high street retailer established 133 years ago, entered administration recently, putting 700 jobs at risk.
The problems in the sector have been exacerbated by fierce competition, especially in food and clothing, making it difficult for retailers to pass on costs associated with the fall in the pound and business rates.
Shop prices also continued to fall in March, according to figures from the BRC, with prices on clothing and footwear down by as much as 5.9 %.
Big retailers, including Boots, John Lewis, Tesco and Sainsbury’s, have all been reducing headcount to survive the increasingly difficult retail environment.
Helen Dickinson, chief executive of the BRC, said: “We expect retailers to continue reviewing how they work with their people as they look to address the changing face of retail and keep prices low for consumers. “Building inflationary pressures and public policy costs, alongside intense competition, are taking their toll, and retail, as a people intensive industry, is being hit hard. “That said, many retailers are actively investing in their people to improve the quality and productivity of jobs per employee.”
A triple-blow of tax hikes, rising costs and a squeeze on consumer spending is threatening to wipe out thousands of British retailers, with a string of familiar high street names expected to fall into administration this year.
Nearly 23000 retailers were under significant financial stress at the end of the first quarter according to insolvency firm Begbies Traynor – a rise of four per cent compared to the year before.
Nick Hood, a business risk adviser at Opus Restructuring, said between five and 10 high-street names could become insolvent this year. “There will be more casualties going through the summer,” he said. “A lot of stakeholders are now thinking there’s been a really fundamental change and I think the trigger for it is business rates… There is clearly a sorting-out going on in certain sectors, such as footwear and middle-market fashion.”
Jaeger became the latest high street name to state its intention to shut stores at the end of last week. Twelve other retailers had already entered into administration by the end of March, according to analysis by the Centre for Retail Research (CRR).
Spending on the high street fell by 1.3 % in March, card giant Visa said this morning. Its latest consumer spending index revealed weakest quarter for spending growth since 2013.
Richard Hyman, an independent retail analyst, said the number of retail failures will “gain momentum” throughout the year.
“By the end of this year it will be a large number,” he said. “A much larger number than post-Lehman brothers.”
Fifty-four retailers went into administration in 2008, according the CRR, affecting more than 74000 employees.
Julie Palmer, partner at Begbies Traynor, said that there was a “hodgepodge” of factors making business difficult for retailers, including rising business rates, tough competition, the fall in the value of sterling and rises in the national living wage. “The effects will be seen right across retail, in smaller and larger business,” she said. “There will be some larger names in there as well.”
The full impact of changes to business rates, which came into effect at the beginning of April, has not yet been felt by the sector. But even prior to the changes, many firms have found the going too tough.
Last month, Brantano footwear and several of Poundland’s 99p Stores collapsed into administration. Jones the Bootmaker was saved from failure by private equity firm Endless, and Store Twenty One entered into talks with lenders after struggling to keep up with rent payments. High street clothing store Jaeger is expected to enter into administration within days.
Hood added that suppliers and credit insurance firms will be looking “very carefully” at the high street retailers he has deemed at risk, and will be making decisions about whether or not they want to support struggling businesses until the Christmas sales period.
The problems in the sector have been exacerbated by fierce competition, especially in food and clothing, making it difficult for retailers to pass on costs. Shop prices continued to fall in March, according to figures from the British Retail Consortium, with prices on clothing and footwear down by as much as 5.9 %.
Big retailers, including Boots, John Lewis, Tesco and Sainsbury’s, have been reducing headcount to survive the increasingly fraught retail environment.