As the British high street dwindles to a handful of household names, discount retailers and independent businesses, the pressure is on to revive the high street and shop local — or risk the collapse of local retail hubs. As COVID-19 lockdown restrictions ease, otherwise tipping businesses to the edge, we question the fate of the UK high street and whether there is hope for it to be revitalised.
The Collapse of the British High Street
Tracking how U.S. businesses are faring during the pandemic, more than 340 companies declared themselves bankrupt in 2020, attributing COVID-19 as the partial reason for their demise. As peak trading seasons experienced disruption due to stay-at-home orders and social distancing measures, well-known names such as Hertz and Furla filed for reorganization.
Turning the focus to the UK, the widely popular Arcadia Group, the parent company of Topshop, Dorothy Perkins, Miss Selfridge and Burton fell into administration last year, resulting in a string of store closures across the country. A rescue deal was struck by online-only retailers ASOS to buy the brands; however, this excluded the purchase of physical stores.
This highlights a pattern in the appetite of online retailers to fuel growth through brand association, snapping up ailing businesses amid the pandemic in the hope of dominating global online markets. The rapid availability of investment funds during the coronavirus pandemic also demonstrates their appetite for growth, as Boohoo and ASOS rapidly secured the deal under time-sensitive conditions.
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Leading to rows of empty stores on the high street, this set a challenge to neighbouring stores to remain buoyant and continue to attract footfall. As online competitors offer rapid delivery, attractive prices and flexible returns, customers are becoming disenchanted and disinterested by the high street, resulting in the takeover of online shopping.
Following the purchase of multinational retailer Debenhams by British fast-fashion giants, Boohoo, Debenhams is expected to continue as an online-only operation, resulting in the loss of up to 12,000 jobs. As the legacy of the business founded in the 18th century is set to continue in the ecommerce world, the physical closure of Debenhams stores will soon lead to over 100 empty units across the country, well known for their towering premises and generously sized shops.
Are Online-Only Businesses Better Equipped for Economic Uncertainty?
The collapse of Debenhams was partially attributed to the adverse trading conditions imposed by COVID-19, muddying the waters concerning a possible restructuring solution. As the coronavirus pandemic led to the sudden closure of non-essential high street businesses, physical sales dried up and footfall erased overnight.
In light of the closure of the retail sector due to the coronavirus lockdown, sales forecasts no longer remained relevant and employees took to their homes, financially protected by the Coronavirus Job Retention Scheme, also known as the furlough scheme.
Due to the structural nature of ecommerce, online shops remained open as usual during the coronavirus pandemic. As consumers diverted their custom from high streets to online stores, the online shopping arena capitalised on this boost in trade, undoubtedly converting a large share to continue shopping online post-pandemic.
As shops remained closed, essential bills such as business rent and property maintenance costs continued to accumulate, in addition to costs associated with facilitating a COVID-19 secure environment, such as signage to indicate social distancing in preparation for its reopening.
Where physical stores require constant stock replenishment, aesthetically pleasing and on-brand shop displays, the costs are much lower to maintain a digital shopfront. Having employed individuals with the relevant creative skillset and understanding of technology, an online business can update its home page at a moment’s notice. This represents minimal overhead and a job that can be easily conducted remotely, better equipping online stores for economic uncertainty such as the COVID-19 pandemic.
Will the British High Street Bounce Back Post-Pandemic?
In March 2021, the UK Government released its interim report on the Fundamental Review of Business Rates ahead of its full release in autumn 2021. The interim report briefly touches upon the possible introduction of an Online Sales Tax, which arguably aims to balance the scales between online stores and physical stores. Online Sales Tax could add to the overheads of online businesses, as property fees such as rent and rates weigh upon physical stores, hoping to ‘level the playing field’ and tame the threat from online competitors. In the U.S., online sales tax is already in motion for ecommerce businesses, structured by a financial threshold.
As local businesses and independent shopfronts had their livelihoods pulled from them during COVID-19, many local authorities proactively launched campaigns to encourage customers to shop local. The government launched the ‘Shop Local’ week to help local businesses rebuild and recover from the income loss triggered by COVID-19. Google My Business also launched an advertising campaign promoting online visibility tools for local businesses, helping them survive the pandemic, embraced by the hashtag #DearLocal.
As businesses wean off emergency COVID-19 government support and lockdown restrictions ease on the retail sector and other non-essential businesses, high streets are expected to attract thousands of shoppers following the on-and-off closure of stores over the space of three lockdowns.
Keith Tully is a Partner at Real Business Rescue, professional services firm aiding in the turnaround and recovery of distressed businesses across the UK. Tully is a licensed insolvency practitioner with over 30 years of experience, instrumental in supporting limited company directors during the coronavirus pandemic. As a veteran in the insolvency sector, he is well versed in company rescue, company restructuring and company liquidation solutions.
