Retailers have told Drapers they are facing a “perfect storm” of cost rises, a record number of store closures, slumping sales and continued Brexit uncertainty.
This week is crunch time for the Brexit talks: if the UK fails to get another extension by 12 April, it will crash out of the European Union without a deal – unless it decides to revoke article 50.
Brexit uncertainty has caused total UK sales to fall by 1.1% in the four weeks to 30 March, compared with an increase of 1.4% in March 2018, the BRC-KPMG Retail Sales Monitor showed this week.
Accountancy firm BDO’s Optimism Index shows it has also caused business confidence to crash to its lowest level since September 2012, down from 99.79 in February to 96.10 in March.
Meanwhile, businesses face the additional burden of a 4.9% rise in the living wage to £8.21/hour and a £186m increase in business rates, both of which came into effect on 1 April.
“Brexit uncertainty is resulting in subdued consumer spending across retail,” Marc Dench, chief financial officer at Joules said. “Combined with Brexit, you’ve got other costs growing, such as national living wage, pensions, the apprenticeship levy and business rates. Any of one of these factors is challenging, but all of them combined makes it very hard for a lot of retailers to continue in the current climate without resulting in store closures or company voluntary arrangements.”
- How retailers and brands are planning to beat Brexit including Next, Pentland Brands, Joules, Charles Clinkard, Claret Showroom, Seraphine, Douglas & Grahame, Trinity (owner of Kent & Curwen and Gieves & Hawkes), Frugi, Black White Denim and more
A record net 2,481 stores disappeared from UK high streets in 2018, research for PwC compiled by the Local Data Company has shown. In total, 3,372 shops opened, while 5,833 closed.
“It is no coincidence that more UK high street retailers have fallen away in the last three years than probably in the last 10 years,” said Ray Clacher, executive vice-president at Trinity, which owns premium brands Gieves & Hawkes and Kent & Curwen.
“Brexit must have played its part. The general public is exhausted by it all as this political soap opera rambles on. Economic uncertainty and a fear of currency collapse, pension deficits and a property price crash definitely stops people buying ‘stuff’.”
The managing director of one multiple retailer agreed: “There is no question that we felt a slowdown in March having started 2019 really well. The shift of Easter makes it hard to draw a final conclusion until we get to the end of April, but it is concerning.
“Uncertainty with regards to Brexit, a volatile FTSE, a sluggish pound – if you throw pressures of rising rates and employment costs [on top of that], it certainly makes for a challenging time ahead.”
Rob Feldmann, chief executive of off-price etailer BrandAlley, said: “Brexit uncertainty is really crippling the fashion industry. People are not buying because they are waiting to see what happens.
“It’s also tragic that the government isn’t addressing the issue of rates properly because it’s incredibly hard on so many businesses. It’s not healthy for anyone if there’s a lot of empty units on the high streets of towns and cities.”
Touker Suleyman, owner of Hawes & Curtis, Ghost and Low-Profile Fashions, added: “Retailers are currently facing the unknown. Business rates are disproportionate, prices will go up with inflation and there is a constant threat surrounding online retail. There is also the uncertainty surrounding Brexit. It’s the perfect storm.”