News Article

Sector Analysis

Pace of retailers shutting up shop plummets to lowest level for five years says PwC and The Local Data Company

By CreditMan Monday, October 19, 2015

In the first six months of 2015, 2,634 shops closed on Great Britain’s high streets, a rate of 14 stores a day, PwC research compiled by the Local Data Company (LDC) shows.

This is the lowest closure rate in five years and also represents the lowest levels of churn - entries and exits - on the high street since 2011 as upheaval driven by retailers reacting to shifting customer habits starts to subside.

After reaching 16 stores per day in H1 2010, the rate of store closures peaked at 20 in the first six months of 2012 before steadily dropping to today’s levels.

The analysis of 65,588 outlets operated by multiple retailers* in 500 town centres across Great Britain found that overall volumes of activity ( openings + closures) have plummeted from a record 7,749 in H1 2010 to 4,831 in H1 2015.

This reflects a less hostile environment for embattled retailers with fewer insolvencies and store portfolios streamlined in response to the advance of online shopping.

However, the PwC/LDC study shows that 2,634 outlets closed in a six-month period compared to 2,197 openings, a net reduction of 437 shops. This represents a slight widening of the gap when compared to the previous year. In H1 2014, 3,003 outlets closed in a six-month period compared to 2,597 openings, a net reduction of 406 shops.

Coffee shops, charity shops and jewellers were among those growing at the fastest rate during the first half of 2015.

The data also reveals that across multiple retailers in 500 town centres cheque cashing, banks, fashion shops, gift shops, and women’s clothing shops have been amongst the hardest hit in the first half of 2015.

Against backdrop of a steady economy and tightening regulation, cheque cashing shops have closed 116 stores vs six openings, a net change of -110.

Mike Jervis, insolvency partner and retail specialist at PwC, said:

“The numbers don’t lie: H1 2015 represents the lowest levels of churn we have seen on the high street for at least five years. On the positive side that means there have been fewer retail insolvencies, on the negative side that means less confidence in bricks and mortar from the multiple chains.

“The closures are caused by sector-specific factors: regulation is hurting money shops, the internet is hurting traditional bricks and mortar fashion chains.

“The tug of war between ‘clicks’ and ‘bricks’ has forced major changes on the high street not only for the retailers, but also for landlords too. The average unexpired length of a lease is now less than nine years compared to 22 years back in the early 1990’s. The renewal rate on leases is down to 9% in recent years, compared to 30% in the mid 2000’s.”

The changing profile of town centres is very clear in this analysis - 155 goods shops of a more traditional type (e.g. shoe & clothes shops) pulled down the shutters. Service retail (e.g. travel agents, pawnbrokers) saw a continued net decline in shops from -245 units (-1.43%) in H1 2014 to -299 (-1.72%) in H1 2015. Leisure chains (food, beverage & entertainment) have continued to thrive albeit at a slower rate with the number of outlets from +170 (1.17%) in H1 2014 to +43 (+0.29%) in H1 2015.

Although within the leisure sector there is a variance with categories such as American restaurants (Burger chains), Café & Tearooms and Coffee shops, which are growing, while betting shops and pubs are closing.

Mark Hudson, retail partner at PwC said:

“Online sales growth is slowing and consumer spending is increasing so the dramatic impact on store numbers of the ‘double whammy’ of channel shift and fewer store visits is abating for now and we are returning to a more natural level of churn.

“What's clear though is that a tidal wave of change on the high street is still washing through and that consumer shopping behaviour means we're not going to go back to the traditional high streets of the past. The sustainable new businesses occupying our high streets are often leisure or services based - more about enjoying the experience than browsing or buying a product. The near term winners and losers are on or off trend - for example, health foods are one of the sectors thriving but payday lending is suffering. High streets are in a constant state of evolution and that's not going to change.”

Matthew Hopkinson, director of The Local Data Company, said:

“The results of the openings and closures of chains in our top 500 town centres in the first half of this year are encouraging. Closure rates are down and the gap between openings and closures is levelling out. This is as a result of wider consumer confidence, adjustments to market rents and most importantly a better understanding by chain retailers as to the role and opportunity that shops still have to play in the ‘total retail’ environment.

“As ever, the devil is in the detail. We are seeing the continuing decline of pubs and clothing shops whilst seeing previously expansive sectors such as banks, betting shops and cheque cashing all in retreat from the high street.

“In the last five years alone over 62,000 shops of multiple retailers have opened and closed in the top 500 GB towns so look wider and that number rises significantly.”

Source - PwC/LDC