UK high street occupancy rate at 16-month low

Rise of pop-up shops blamed, but Brexit may also be a factor

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(Image credit: Oli Scarff/AFP/Getty Images)

More than one in ten high street shops across the UK are sitting empty for the first time in more than a year, a study from the British Retail Consortium (BRC) and research group Springboard says.

The report on sector trends finds 10.1 per cent of the UK's town-centre shop units were vacant over the three months to the end of July - up from 9.6 per cent in April and the lowest rate recorded since April 2015, reports The Guardian.

BRC blames the increase in part on the rise of "pop-up shops" - temporary stores that tend to be on shorter six-month leases opened either to prove a retail concept or as a marketing exercise by an established brand.

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There was a boom in the number of pop-ups in the run-up to Christmas last year and this is the first year where any widespread failure to convert to permanent leases would show up in national figures.

Some industry experts are pointing to the Brexit vote and the uncertainty this has created over the economy. But BRC says any such effect would not become clear until next quarter's figures, which would show whether pop-up shop numbers enjoyed a seasonal rebound.

Shopper numbers in town centres rose 0.3 per cent in July, up from a year-on-year decline of 3.7 per cent. In contrast, out-of-town shopping centres saw a drop in footfall.

Diane Wehrle, a director at Springboard, says the referendum fallout could already be skewing spending trends, with the weaker pound resulting in a higher number of tourists bagging bargains in cities such as London.

BRC's chief executive, Helen Dickinson, says the vacancy rate figures should act as a "wake-up call", reports the Retail Gazette. "If property costs in general, and business rates in particular, continue ever upwards, we should all be concerned," she says.

Commercial property prices are expected to come down in the post-Brexit vote economy, while business rates, at least outside the south-east of England, are also expected to fall once a long-awaited government review concludes next year.

Late Christmas splurge to prevent store closures

22 December

High street retailers are in more financial distress than in previous years but a late Christmas spending splurge could yet prevent a wave of store closures, according to insolvency experts.

The UK's largest insolvency practice, Begbies Traynor, has published figures showing that around 24,737 retailers are experiencing "significant" financial distress, says The Times. It cites particular struggles in the food sector, where an aggressive price war triggered by the rise of discounters has depressed margins everywhere and increased the number of firms in trouble by 11 per cent compared to last year to 4,226.

Atradius, one of the world's largest trade credit insurers, echoed these concerns to The Guardian. It described a "perfect storm" hitting retailers, with winter clothing sales hampered by an unseasonably mild winter and consumers moving online in droves. It said that overall spending was failing to match increases in disposable income as a deflationary environment encourages outlays to be delayed.

Such concerns are significant. If insurers such as Atradius refuse to back a retailer then suppliers will be unable to insure orders and may refuse to provide products, The Guardian notes. Trading in the final three months of the year is critical as it typically accounts for 40 per cent of retailers' annual sales.

But Begbies Traynor's Julie Palmer says there is still time to turn things around. She points out that in the era of online shopping, people tend to do a lot of early ordering through internet sites, but that she is nonetheless expecting to see a late surge of shoppers to high street stores intent on grabbing last-minute bargains and Christmas food supplies. As an additional lure for consumers, shops are discounting early.

Not all analysts see the high street as being in such dire straits. Building on reports earlier this year that there have been fewer store closures, a recent survey of more than 100 retailers by the Confederation of British Industry found that retailers were approaching the Christmas sales season in a positive frame of mind and sales were ahead of average for this time of year.

The poll found a net balance of stores seeing sales increasing had risen from +7 in November to +19, which the CBI's distributive trades chairman Barry Williams, who is also chief customer officer at Asda, said pointed to a recovery in "the final shopping days of the Christmas season".

Williams warned, though, that conditions are expected to remain difficult – especially heading into 2016.

Store closures: will rates 'shake up' help or hinder?

07 December

A government review of the business rates paid by store owners will bring the biggest change in bills in a generation. But the Daily Telegraph notes the scale of the project has caused the five-yearly revaluation, which had been due this year, to be pushed back to 2017.

As a result, retailers - many of whom argue that business rates need a fundamental rethink as they are often higher than rents and hamper profitability - will not find out until next October whether they will win or lose.

Some indication of what to expect has been provided by commercial property agency Colliers International, which has analysed the rental data on which rates are based from 2010 and 2015 and produced estimates on the likely outcome of the review.

In short, most will see their bills fall: around four times more will pay less than face an increase under the new system.

Significantly, those losing are exclusively in the southeast and London, where there is a greater concentration of wealth but where bills and overheads are already far higher than other areas of the country.

Around 324 retail centres across Britain will see a decrease in business rates while 21 will pay the same amount, says the Telegraph.

Newport in South Wales is the UK's biggest winner, with an 80 per cent cut, while even in London there are those that gain. Tenants on Tottenham Court Road will enjoy a 12.4 per cent decrease.

But the BBC reports that 76 of the southeast's main town centres and shopping centres will see rates go up. The biggest rise is in Dover Street in the capital, which will see a staggering 425 per cent rise, while outside London, Marlow is the biggest loser with a hike of 58 per cent.

"The business rates losers are found only in London and the South East and it could turn highly profitable stores, including independent retailers, into failing businesses," John Webber, ratings expert at Colliers International, told the BBC.

Spare a thought for councils, too. After years of budget pressure at a time of government cuts, they are to be given 100 per cent of all business rate revenue in April. The following year in most areas of the country it is set to decline.

Store closures hit five-year low

15 October

Britain's economic recovery is increasingly being felt on the high street, with new data showing that the number of shop closures fell to a five-year low in the first half of this year.

Figures from PricewaterhouseCoopers reveal that 2,534 shops nationwide closed in the first six months of this year at a rate of 14 a day, the Daily Telegraph reports. This compares with 15 closures a day in the same period last year and marks a continuing improvement from a peak shutdown rate of 20 a day in the first half of 2012.

With the nation's shopping habits still evolving and swathes of retail sales continuing to move online, this positive picture does come with caveats. Only 2,197 stores opened between January and June this year, meaning there was a net reduction of 437 shops, up from a net fall of 406 last year.

The type of shop that's now thriving is also changing. Coffee shops are leading the way with 26 new openings in the first half of the year. These represent just one of a number of more "leisure and service-based" businesses that are increasingly dominating the high street. Health food shops and takeaway outlets are also flourishing.

Meanwhile traditional pubs remain in serious decline, while companies that have lost favour with regulators and customers alike (such as payday lenders and major banks) have among the highest closure rates.

Charity shops, on the other hand, continue to grow in number. The Telegraph speculates that their increased presence on our high streets could highlight the issue of business rates and the strain this places on smaller retailers. (Charity shops are exempt from paying rates.)

Matthew Hopkinson, director of the Local Data Company, told the Guardian the "devil is in the detail".

On the bright side for shops, "online sales growth is slowing and consumer spending is increasing, so the dramatic impact on store numbers… is abating for now". But Hopkinson adds that "a tidal wave of change is still washing through the high street and that consumer shopping behaviour means we're not going back to the traditional high streets of the past".

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