High street's survival under threat as lockdown hits stores

Phillip Inman
Photograph: Robert Perry/EPA

Fears that many of Britain’s high street shops will be forced to close down permanently despite the government’s emergency support were fuelled yesterday after a string of retailers said the coronavirus outbreak could make their businesses unviable.

As the Restaurant Group said it would shut the majority of its Tex-Mex Chiquito restaurants for good, Swedish fashion retailer H&M threatened landlords that it would walk away from its 300-plus store leases if sales fail to match pre-coronavirus levels once the pandemic passes.

Analysts said the likelihood that ministers would need to extend shop closures through the vital Easter trading period would push more retailers into handing back the keys to their shops.

Business groups warned that without extra government support, including an extension of the business rates holiday to the end of the year, financial pressures were growing on town and city centre shop owners.

Adam Marshall, director general of the British Chambers of Commerce, said he was worried that town high streets were especially vulnerable to an extended shutdown.

“My biggest concern is about secondary high streets [smaller retail areas] and those in towns that were already facing huge difficulties,” he said.

“The government is going to need to act quickly to extend the business rates holiday to save retailers from going under, and many other service business threatened by the current shutdown.”

A survey by analyst Retail Economicsof 2,000 consumers, due to be published next week, found that two-thirds of shoppers said they had switched to purchasing products online that they have always previously purchased in-store.

Britain’s high streets have become blighted by shop closures over the last three years in response to rising costs and the increasing volume of sales over the internet.

A total of 143,100 jobs were lost in 2019, up by more than a fifth on 2018’s 117,400 job losses, according to the Centre for Retail Research (CRR).

Retail casualties include Mothercare and Bonmarché, which filed for administration, while Sir Philip Green’s Arcadia Group and Debenhams were among the firms to shed loss-making stores following deals with creditors.

Diane Wehrle, marketing and insights director at Springboard Research, said: “I fear for the independent sector, which is dominated by family-run businesses that are often subsistence operations.

“Their ability to survive with no income is going to be challenging when they have little working capital reserves and are based in small towns.”

Springboard’s latest retail monitor found that footfall across all destinations dropped by 70.1% last week on the same week last year. The drop in footfall on the previous week was 60%.

H&M, which has expanded rapidly in recent years and ranks as an anchor on many high streets, wrote to landlords last week asking them to agree to terms that could see the retailer break a store lease with one month’s notice if trading conditions did not return to pre-outbreak levels.

In a separate letter, seen by industry magazine Retail Week, the fashion retailer also pushed landlords to agree to a variety of rent-free periods , a reduction in service charges to reflect drops in footfall and a change to paying rents monthly in arrears.

The letter said: “In all of the above scenarios, H&M is to have the right to close stores immediately without being in breach of the keep open clause” and “personal concessions are to remain and fixed rents will not be payable”.

A spokesman for Usdaw, the shopworkers’ union, said a shift to online shopping, which was likely to be accelerated by the Covid-19 outbreak, meant the government needed to go further than a business rates holiday and bring forward reforms that shifted the tax burden to online operators. “There needs to be a rebalancing between bricks and mortar shops and online operations, or we will see fewer shops opening up again after the lockdown has eased,” he said.

Neil Leitch, chief executive of the Early Years Alliance, said rent demands by landlords could leave childcare provision “in tatters”.

Access to childcare will be crucial to allowing other workers to return to employment, but Leitch warned the pandemic risks causing permanent damage to an industry that was already struggling to meet costs.

While help is available to them through business rate holidays and government scheme to pay the wages of staff, many have reported that they still face demands for rent. Meanwhile, largely self-employed childminders face waiting until June for financial help.

Childcare places had already been declining. More than 500 nurseries, pre-schools and childminders closed every month on average between April 2018 and March 2019, according to Ofsted figures. The government is honouring funding for free childcare places. However, childcare providers have long relied on private feepayers to make the sums add up.