The latest figures reveal a sharp acceleration in the number of retailers going to the wall. Can anything be done? By Ian Quinn and Christopher Goodfellow


As Mary Portas, the government’s retail tsar, was meeting with industry leaders this week in a bid to help towns and cities across Britain, high street vacancy rates were in some cases close to 40%. And that was before the summer riots and the stock market and currencies caused even more potential damage to trade.

Amid what the head of The Co-operative Group last week described as the worst trading conditions in 40 years, a perfect storm of poor consumer confidence, coalition austerity and negligible economic growth is leaving a growing number of victims in its wake.

Research by The Grocer shows the number of retailers calling in administrators jumped by nearly a third to 87 in the first half of 2011. And year-on-year the number of companies calling in administrators is up almost 75%.

“Businesses that took steps in 2008 and 2009 to cut costs and manage cashflow better were in many cases bumping along the bottom,” says Tom MacLennan, head of lender services at accountant RSM Tenon, one of those dealing with companies going bust.

“Now there’s a further downward trend in discretionary spend. For some it’s too much.”

More than one in 10 shops on high streets and shopping centres are now vacant, according to a new BRC vacancy survey, with research by the Local Data Company claiming the rate of high-street shop closures has risen to nearly 15%.

While the big food and drink retailers can weather almost any storm, smaller companies find themselves in a very different boat.

“The food and drink sector is protected to a degree,” says MacLennan. But even there, he adds, “margins are being eroded and suppliers are facing price inflation, while at the same time customers are battening down the hatches for another period of slow economic growth. Most of the smaller businesses are lifestyle businesses. Their owners will stick with them as long as they can. They will cut staff and cut costs, but in the last resort they will close down or go into administration.”

And it’s no longer just small retailers that are going to the wall. In the first half of 2010, 10% of those entering administration had multimillion-pound turnovers. But that rose to 23% in the first half of 2011 [Companies House; latest figures]. Recent high-street casualties include household names such as TJ Hughes and Jane Norman.

With falling footfall and slumping sales, many businesses are now finding it impossible to pay bills, with the taxman most likely to press the trigger. In July 2011 alone, in another leap on last year’s levels, HMRC filed 11 winding-up petitions against retailers nearly half the total number.

And financial hardship for small retailers can get to extremes before the end comes. The Grocer spoke to one small trader who had finally decided to shut up shop after months of surviving by eating her store’s out-of-date food. Sadly this is far from a unique story.

The next big potential crisis point for many businesses is looming fast, with quarterly rents due at the end of this month. The crucial Christmas period will be make or break for many.

And leading accountants agree the toll of companies resorting to administration is likely to be even worse for the second half of 2011.

“We are going to see a distinct rise in business failures,” warns Tony Nygate, a partner at accountants BDO, “due to the lack of consumer spending and inflation going up at a rate greater than wages, combined with the VAT issue”.

Resuscitation tactics
So is there anything that can be done to reverse the trend? The BRC stresses its determination to lobby government over the collapse of high streets but it admits the prognosis is grim. Jane Beavis, director of public affairs says: “The trouble with the figures is they only look at what has happened in the previous six months. The true situation may be even worse. That’s why we started our vacancy survey.”

Some factors may yet play in favour of high streets and shopping centres. Recent reports indicate the soaring cost of fuel is leading to a 20% reduction in longer car journeys, with shoppers choosing to go to neighbourhood stores instead of out-of-town outlets.

As a result, out-of-town grocery shopping is growing more slowly than any other grocery outlet, the BRC vacancy survey shows.

Equally, there are fears the retail tsar will, despite her ferocious reputation and high profile, focus on the “softer stuff”, says James Lowman, CEO of the Association of Convenience Stores by which he means improved parking and more attractive loyalty schemes. It is much more important, he says, that Portas should direct her fire at government policy on planning and rates.

With the cost per square foot of town centre stores far higher than for out-of-town developments, Portas will also be urged by politicians and industry to look at rate rebates, special codes and a change to the law to enable retailers to pay rent monthly rather than quarterly.

Another oddity still to be overcome is the continuing reluctance of landlords to lower rents. While there is recent evidence that landlords have softened their positions in some instances, achieving structural change can be hampered by the sheer diversity of landlords. But not always. One of the most famous high street redevelopments in the past decade has been Marylebone High Street in London. At one point more than 50 shops were boarded up.

But as well as being in an upmarket part of town, it benefited from just having a single landlord Howard de Walden Estates, which was able to plan the regeneration of the High Street in a strategic way, selecting retailers it felt would be most capable of bringing vitality and healthy trade back.

Landlords, local councils and the government all have a part to play.But by the time Mary Portas publishes her report in November, for many it will already be too late.