Last year was a “brutal” one for Britain’s retail sector, with more shops shutting down than at any other point in the last five years, and 2023 will be similarly challenging, according to industry groups.
About 47 shops on average pulled down their shutters for the final time every day last year, according to analysis from the Centre for Retail Research (CRR). It found a total of 17,145 shops on high streets and in other locations closed for good over 2022. This is up almost 50% on the 11,449 shops closed in 2021, during the Covid pandemic.
The CRR also said that 151,474 retail jobs across the UK were lost in 2022, including those from online retailers – up 43% on the 105,727 jobs lost in the previous year.
It found 5,509 shops were closed because retailers went bust, entering some form of insolvency, while a further 11,636 were shut as part of cost-cutting programmes by large retailers, or independents simply shutting up shop for good.
However, the number of store closures caused by big chains, those with 10 or more outlets, was down by 56% because most of the poor performers already collapsed in previous years. Retailers that went into administration in 2022 included the clothing chain Joules and the McColl’s convenience store chain. Next ultimately teamed up with the founder of Joules to buy it out of administration and Morrisons bought McColl’s but there were store closures and job losses in both cases.
The CRR’s director, Prof Joshua Bamfield, said: “Rather than company failure, rationalisation now seems to be the main driver for closures as retailers continue to reduce their cost base at pace.” He expects this trend to continue in 2023 but added: “A few big hitters may well fail, too.”
The research found 11,090 shops were shut by independents last year, while large retailers closed 6,055 shops.
The property adviser Altus Group estimates that retailers and landlords will have to pay close to £1.1bn from 1 April over the next tax year to cover the business rates on empty sites that have been vacant for three months.
Robert Hayton, the UK president at Altus Group, said: “Rate-free periods need to be urgently extended to reflect the time that it actually takes to re-let vacant properties.
“The current woes facing the retail sector, driven by the war in Ukraine, mean that empty rates are ripe for modernisation.”
The British Retail Consortium said 2022 had been “an exceptionally difficult year for both consumers and retailers”, with sales volumes down compared with 2021.
At a time when many costs were already going up because of supply chain problems, the war in Ukraine pushed inflation into an upward spiral, with energy and food prices climbing by more than 10% year on year during the second half of 2022, the industry body said. Retail sales grew 2.3% during this period as the cost of living crisis unfolded. However, when inflation is taken into account, sales volumes declined for food and non-food items.
Sales are expected to grow between 2.3% and 3.5% this year, picking up in the second half (to between 3.6% and 4.7% from 1% to 2.3% in the first half), assuming inflation slows and consumer confidence improves.
Kris Hamer, the BRC’s director of insight, said: “The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5bn as the government’s energy bill relief scheme comes to an end in March, putting ongoing upwards pressure on prices.
“There is cause for optimism in the second half of 2023, when we expect inflation to ease and improving consumer confidence to result in an improvement to sales growth, and corresponding volumes.”
